it appears the company has the most unhappy customers in the wireless industry. Based on the rate at which customers leave the company and two independent surveys, the nation’s third-largest carrier is struggling to please its customers.
Churn rates don’t lie
Let’s start with the wireless industry’s plum line for how well a carrier holds on to its customers — churn rate. Churn is the percentage of customers that leave a carrier for another network. In Sprint’s most recent quarter the company had a postpaid churn rate of 2.18% — the highest of all major US carriers.
In the company’s fiscal Q2 2014 earnings release this week, Sprint said it lost 272,000 postpaid subscribers in the quarter. Net tablet additions hid some of the worst news that a whopping 500,000 phone subscribers left in the three month period. That’s terrible news for Sprint and its investors.
By comparison Verizon had a churn rate of 1.00%, AT&T’s AT&T INC.
was 0.99% and T-Mobile’s T-MOBILE US
was 1.6% in each of their most recent quarters.
Of course there are a few factors that play into churn rates other than a customer being dissatisfied with a carrier, but on the whole the lower the churn rate the better the indicator customers are happy with their current wireless provider.
But let’s assume for a minute that Sprint has a higher churn rate than its competitors for some reason other than customer dissatisfaction. Well, then we could look to other sources for whether or not Sprint’s customers are truly unhappy.
The list no company wants to be on
A recent survey commissioned Zogby Analytics for 24/7 Wall Street showed that Sprint topped a list for one of the worst customer service companies. More than one in five survey respondents said Sprint’s service was “poor.”
This comes as Sprint was fined $7.5 million by the FCC earlier this year for violating “do-not-call” requests by its customers. To be fair, Sprint’s not the only one. AT&T is paying $105 million to settle FTC charges that it added unauthorized charges onto its customers’ phone bills.
But even before this survey came out, Sprint’s been known for its lackluster reputation among the public.
An ongoing problem
Last year Consumer Reports published a survey showing that Sprint was in dead last place among cell phone carriers, according to the publications’ readers. While the Consumer Reports took into account factors like voice calls and data, the most telling indicators came from Sprint’s customer support.
For “ease and speed of getting through phone system to appropriate support staff” Sprint received Consumer Reports’ worse-than-average rating, as did the company’s rating for how well customer issues were resolved. The highest rating Sprint got was “average” for how knowledgeable the company’s staff was. Not exactly a stellar report card.
This is isn’t helping things either
According to data from RootMetrics, in the first six months of this year Sprint had the worst performing network of all the major wireless carriers.
Sprint trailed the pack in network speed, call performance, and data performance, while barely beating T-Mobile for reliability and text performance.
Fortunately, Sprint’s in the process of updating its old 3G network with 4G LTE and is bringing its ultrafast tri-band Spark network to more cities. On top of that, Sprint just replaced its former CEO with billionaire Marcelo Claure, the founder of the wireless distribution services company, Brightstar. With a new network and a new leader, RootMetrics thinks Sprint’s last place finish could be short-lived.
While Sprint’s clearly making changes to reverse its place among competitors, the company needs to focus on its industry high churn rate. Competition among wireless carriers is stronger than ever, and with T-Mobile’s aggressive offers and superior network, there are some clear benefits for Sprint customers to switch to the “uncarrier” network.
I think Sprint has a long road ahead of it in changing its place in the wireless industry. The company could stand to take a few pages of out T-Mobile’s branding book. Sprint CEO Marcelo Claure reportedly asked his vice presidents “Why would anybody want to buy a Sprint phone?” after he took over the job — and they had no answer. If that’s the case, it’s no wonder why Sprint customers are likely asking themselves the same thing.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.