AT&T's Customer Satisfaction Gets Surprising Boost from iPhone

By Trefis Team,

Shutterstock photo

AT&T ( T ), which primarily competes with Verizon ( VZ ) and Sprint ( S ) in the wireless business, continues to see growth in the number of iPhone activations.

During Q3 of 2010, AT&T witnessed nearly 5.2 million iPhone activations, the highest ever for any quarter. This represents an increase of more than 60% over the previous highest quarterly record of 3.2 million subscriptions. Nearly 1.25 million of the new iPhone subscribers were new to AT&T's network as well. These increases are expected to help improve AT&T's market share in the US mobile phones market as well as drive data ARPU growth.

Despite the possibility of the iPhone being available at Verizon stores in the near future and AT&T's network issues due to high data usage, AT&T continues to attract iPhone lovers both from outside as well as the company's existing customers who are migrating to the device. We discuss this in more detail below.

iPhone Halo Effect and AT&T's Efforts

The Halo Effect is generally used to explain why a customer has a bias towards a certain product because of a favorable experience with another product at the same company.  In this case, according to the technology research and consulting firm Yankee Group, customers view on the quality of service provided by AT&T is influenced largely by their love for the  iPhone as a device . In the survey results, Yankee Group noted that iPhone customers generally have a higher satisfaction rate compared to the overall AT&T customers.

This is not very intuitive considering that AT&T has had issues in the past with its network due to higher data usage by iPhone customers. Since iPhone users tend to access higher amounts of data compared to an average AT&T mobile phone user, they tend to use up large portion of AT&T's network capacity. As a result, AT&T's network has suffered from issues related to dropped calls, delayed texts and voice messages and slow download speeds.

AT&T has been continuously focusing on improving services to its customers. It has upgraded its 3G network with HSPA software to improve 3G speeds and improve consistency in accessing data sessions. The company has done the right thing by not rushing into the next generation 4G network, Long Term Evolution (LTE) as they focus on improving services to customers so as to avoid any network related issues due to high data usage. Had AT&T not done this, dissatisfaction amongst its users would have likely increased causing them to switch networks.

As a result of these measures, customers are preferring to buy the device from AT&T at current prices with a 2-year contract rather than waiting for Verizon to introduce the iPhone.  This is a good sign for AT&T and suggests that impact on AT&T of losing iPhone exclusivity may be limited.

You can see the complete $37.84 Trefis price estimate for AT&T's stock here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets
Referenced Stocks: S , T , VZ

More from Trefis




Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by