The United States market is a critical one for RIM, giving the company about two-thirds of its revenue. Therefore it’s always good for BlackBerry fans to keep an eye on trends in this country.
While there are recognized to be 4 major nationwide carriers, the market has become stratified into a 2-tiered one. We have the first tier of AT&T and Verizon, and then we have the second tier of Sprint and T-Mobile. The second tier simply cannot compete with the first tier at this point in time. T-Mobile is too small, and Sprint is still lacking effective leadership and execution.
The interesting battle is between AT&T and Verizon, the 2 heavyweights. Both just released their first quarter results, and they show what the last several quarters have shown: Verizon is adding new customers at a faster rate and losing existing customers at a slower rate than AT&T. Specifically, Verizon added 1.7 million net subscribers versus 1.2 million for AT&T. On churn, or customer loss, Verizon had a rate of 1.08% versus 1.7% for AT&T. Verizon has more postpaid subscribers, makes more money per customer, and takes in more total revenue than AT&T. (For reference, see the first quarter results: Verizon || AT&T .)
What is instructive is that Verizon is outperforming AT&T on virtually every key metric, in spite of the fact that Verizon is generally regarded as the carrier that is the most expensive and that is the most restrictive in terms of allowing key features on phones. AT&T also enjoys the advantage of operating on the far more widely used GSM technology versus CDMA for Verizon. Largely due to that fact, AT&T generally gets most newer, cutting edge equipment first, as those who follow the BlackBerry world surely know.
With all of these advantages in favor of AT&T, why is Verizon winning? To echo Verizon’s clichéd marketing slogan, it is simply due to Verizon’s superior network coverage and customer service. Consumers, above all, are pragmatic and just want a device that works. As the saying goes, if a cell phone cannot pick up a good signal, it is just a fancy paperweight. It will be interesting to see if the strength of the Apple iPhone release on AT&T will be enough to reverse the trends in relative subscriber growth between the two leading U.S. carriers.
I believe that RIM largely has followed the same arc as Verizon to success: appealing to the market first on reliability and stability; favoring pragmatic usability over frills. Through this they have earned an entrenched position in the enterprise market, and have established a base reputation for quality as they continue to branch out into the consumer market. In the long run this should serve RIM well.
