A new report from the Opinion Research Corporation for the New Millennium Research Council states that millions of Americans are set to disconnect or cut back on their expensive wireless service plans. That’s bad news for Sprint Nextel (NYSE:S), Verizon (NYSE:VZ), and AT&T (NYSE:T), if true.
They are basing their analysis on a survey indicating that two out of every five Americans with contract-based cell phones, totaling 39% or 60.3 million, will cut back on their cell phones due to the severe recession.
Key would be whether those disconnecting revert to cheaper land-line connections or seek alternatives such as Skype, and whether this signals a behavioral shift that continues after (if) we emerge from the recession. Also, I am not sure what companies benefit from pre-paid connections. If you have ideas please forward to me.
Here are their key findings:
“A potentially major shift in consumer habits at the expense of contract-based cell phone service is underway as more consumers seek to save money in the face of the recession. No fewer than 40 million Americans – 26 percent of consumers with contract-based cell phone service -- are “more inclined today than ... six months ago to look at a way to save money on your cell phone bill, such as by switching to a prepaid cell phone service.” This group includes 38 percent of those in households making $35,000 a year or less, 32 percent of African Americans and 30 percent of those aged 18-34.”
“Cell phone extras – such as Internet connectivity, email and texting – are also likely to take a hit in the economic downturn. A total of 19 million Americans – one in five cell phone users with cell-phone extras -- have “considered cutting back” (5 percent) or actually “have cut back” (15 percent) on such features “in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns.” More than two out of five cell phone users with extras on their phones (41 percent) say it is “very” (19 percent) or “somewhat” (21 percent) likely that they will cut back on cell phone extras “if the economy gets worse in the next six months.” Fewer than two in five (39 percent) say it is “not likely at all” that they will make such cuts in the face of a deepening recession. “
OTHER KEY FINDINGS
• Nearly one in five Americans who now have prepaid cell phone service (17 percent) say they switched in the last six months from a contract-based cell phone service due to job or recession-related concerns. This figure includes 23 percent of 18-34 year olds and 29 percent of African Americans with prepaid phones.
• The ranks of all Americans without a cell phone who have “discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns” includes 29 percent of 18-34 year olds and 28 percent of those living in households earning $35,000 a year or less.
• Among those who are likely to cut on back on their cell phones to save money “if the economy gets worse in the next six months” are 44 percent of those aged 18-34, 54 percent of those in households making $35,000 a year or less, and 55 percent of African Americans.
• Two thirds of prepaid cell phone customers say they are saving money “compared to a landline phone or contract-based cell phones.” Fewer than three in 10 (29 percent) said they were not saving money.
• Fewer than half of cell phone users (48 percent) say that the extras on their phone “such as Internet connectivity, email and texting” are delivering a “great deal” (29 percent) or “some” (19 percent) value. About one in five people see little value in such services. About a third of cell phone users (34 percent) have no such extras on their phones.
• More than four out of five Americans (84 percent) are concerned about the economic recession and already have cut back their sending “quite a bit” (39 percent) or "somewhat" (45 percent). Only about one in 10 Americans (12 percent) have made no spending changes as a result of the recession. Over half (52 percent) of individuals in households earning less than $35,000 a year already have cut their spending "quite a bit."
• Four out of five Americans own a cell phone, ranging from 84 percent of 18-34 year olds to just 68 percent of those age 65 or older. While 91 percent of those in households earning $100,000 or more have cell phones, less than two-thirds in households earning $35,000 a year or less (65 percent) have such devices. Nearly one in five Americans (17 percent) reports having a prepaid cell phone currently, compared to 84 percent with a contract-based cell phone. (There is some overlap due to individuals who own both types of phones.) African Americans at 22 percent are the group most likely to have prepaid cell phones.