Due to consumer mobile penetration near saturation, soaring retention costs, consumer price sensitivity and surging data traffic demands, mobile carriers must look beyond market share to advance their growth and profitability, according to analysis in PricewaterhouseCoopers' new report: Change is in the Air: 2009 North American Wireless Industry Survey. According to PwC, growth will be driven by making existing customers more profitable and less by finding new customers.

"The U.S. mobile market is entering an era during which margins and profitability will trump penetration and volume. Where customer experience had been the focus, the emphasis is now shifting to price, across range of customers – including premium users, value-oriented family plans, and the pre-pay market," said Pierre-Alain Sur, U.S. wireless industry leader, PricewaterhouseCoopers. "Now, mobile carriers must dive deeply into the profitability profiles of all their existing customer categories. And with today's enhanced visibility, carriers have a far more robust set of tools to increase their bottom lines across every kind of customer interaction."

According to the report, focusing on subscriber retention remains a critical issue due to escalating retention costs. Large carriers invested more than $160 per subscriber in their networks in the 2009 survey – a more than 30 percent leap over the 2008 survey. Furthermore, U.S. wireless companies reported an increase in customer retention expenses of more than 50 percent in 2008 compared to 2007.

The survey finds that the downturn in the economy triggered an increase in consumers moving towards prepaid plans. On average, use of prepaid minutes increased more than 147 percent in the past four years, from 270 minutes in 2006 to 667 minutes in 2009.

Change is in the Air finds that smart phone sales are increasing and represent significantly higher average revenues per user (ARPU). As of June 30, 2009, 21 percent of all mobile device sales were smart phones, and an average of 12 percent of overall subscribers use smart phones. The average revenue per user for smart phones is $74 compared with total postpaid average revenue of $54.

Despite the difficult economy, carriers are continuing to invest in the network and infrastructure to address increasing data demands and are beginning to migrate towards 4G technology. The survey cites on average, capital expenditures as a percentage of service revenues increased to 21.5 percent in the 2009 survey from 18 percent in the 2008 survey.

As carriers seek to reduce costs and exert an impact on environmental issues, electronic payments are becoming more significant. The survey reports that average percentage of postpaid subscribers receiving paper invoices decreased from 81 percent in the 2008 survey to 72 percent in the 2009 survey, and the average percentage of subscribers that received electronic invoices increased from 6 percent to 14 percent during the 2008 to 2009 survey period.

PwC's analysis concludes that every customer from the premium smart phone user to the pre-pay consumer can contribute to profitability and growth. According to Point of View: Wireless Customer Profitability, mobile carriers will need to adopt a granular point-of-view to:

- Gain more clear insights across the customer base into who contributes to (and detracts from) profitability.

- Adopt targeted and scaled strategies to 'go the extra mile' for high-performing customers and to more carefully mitigate the costs of unprofitable customers.

- Develop customized tools that ensure every touch point - initial contract, handset subsidies, service and retention efforts - keep the bottom line of that unique customer in mind.

- Craft tiered pricing options based on the cost profiles of different customers (e.g. smart phone users v. less data-intensive customers).