A report from Credit Suisse, the financial services company, yesterday upgraded its buy rating of AT&T stock, from “neutral” to “outperform.” The higher esteem for the stock was largely based on a survey by a Credit Suisse analyst named Jonathan Chaplin, in which he found that “only” 23% of iPhone users would like to abandon AT&T for Verizon. The conclusion was that AT&T would lose 1.4 million subscribers to Verizon if a rumored Verizon iPhone were to become a reality.
You know a company is in a funny position when the prospect of “merely” losing about a quarter of an important sliver of its users (the iPhone has brought millions of new customers to AT&T) registers as good news. But the news is indeed good compared to similar surveys that other groups had conducted. Pali Research had made a much grimmer forecast in 2009, saying, “We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.” And according to a survey of 1,000 customers released last month by Morpace, 34% of AT&T iPhone users were waiting to upgrade their phone until another carrier became available, and 47% were considering a move to Verizon. More informal surveys (namely, a handful of my family and friends) put that number closer to 100%.
Could the Credit Suisse report possibly be right? The report is fairly thorough, at 48 pages filled mostly with annotated charts. Crucially, it examines the effect of AT&T contracts; though many users ideally would like to leave AT&T, they wouldn’t break their contract (and pay the fee) to do so. But the report is vague about its methods and sample size, citing a “proprietary Smartphone survey” and “CS estimates.” Chaplin was not immediately available to comment on his methods or sample size.
A few hours ago, MarketWatch reported that AT&T’s CEO Randall Stephenson sought to calm investors worried by the still-not-exactly-PR-friendly prospect of 1.4 million customers jumping ship. “If you look at the iPhone base, about 80% is either on a family-plan or in a business relationship with us,” he said. “Those customers tend to be very sticky. They don’t churn frequently.”
So according to today’s news, AT&T sits more-or-less pretty, its customers bound by service contracts, family ties, and business relationships. MarketWatch didn’t report whether Stephenson said that any of his customers chose to remain with AT&T because they actually were satisfied with his company’s service.
Update 9/22/10: Chaplin, the Credit Suisse analyst, got back to us to tell us more about his survey. It was based on 1645 demographically representative responses. “The more critical part of the analysis is determining how many total iPhone subs there are and how many of these will be under contract. This took weeks of analysis and research. The next challenge was building a model that took into account all of the countervailing trends…Having done all this, I am pretty confident that our view of the total impact on the two companies is more clearly and completely thought out than that of others.”
