Vision Critical survey on wireless usage

I just came across this Forbes Magazine story regarding Wellington Financial Fund III portfolio company Vision Critical. It provides some insights into the expected behaviours of wireless customers in anticipation of a recession in the U.S. Although Angus Reid’s team focused on Virgin Mobile USA customers, the findings are likely applicable across the entire ecosystem. Cell phones are no longer a luxury, even if customers are trying to economize on their wireless bills. Good news for many of our portfolio companies, including Airborne Mobile, BlueStreak, Impact Mobile and Wmode. May also speak to why Nokia recently closed on the previously announced acquisition of OZ Communications, despite a global financial meltdown.

“Fortunately for Virgin Mobile, most of its customers have chosen to trim expenses other than their cellphone usage. Many (88%) said they plan to dine out less frequently, while some 79% say they are deferring big-ticket purchases like cars, furniture and electronics. Others (57%) are cutting back on gas spending, and a noticeable 41% say they’ll just buy fewer groceries. By contrast, only 32% said money worries would crimp their cellphone spending.

An independent study by Nielsen Mobile suggests that at least through the third quarter, customers continued to download mobile applications such as ringtones and software applications. For instance, 18% of subscribers downloaded ringtones in the third quarter of 2008, up from 16% during the second quarter. Similarly, 11% of subscribers downloaded software and applications in the third quarter, up from 7% in the second quarter.

‘Wireless is now a necessity for most people, so the value–and particularly the flexibility of prepaid phone service–is really hitting home,” said Dan Schulman, chief executive of Virgin Mobile USA, which conducted the poll of about 750 adult customers in early November with interactive-market research firm Vision Critical.

Two categories that may be more resilient than cellphones are cable TV and clothing. Respondents appeared reluctant to cut spending on either: Only 28% said they’ll spend less on clothes, and 18% reported they would delay their cable service.

Telecom isn’t immune from the economic downturn, of course: 57% of those surveyed reported that they have changed the way they use their Virgin Mobile service to save money. About a third of respondents (35%) said they have used fewer calling minutes in the past few months, while 19% said they have started texting more and calling less. That’s a mixed blessing for Virgin Mobile, which blamed disappointing second-quarter results in part on users who were substituting lower-priced messaging for voice calls.

Just how wireless carriers position themselves during the downturn will be key to attracting and retaining customers. Prepaid phone service accounts for the bulk of VMU’s business–and it’s an area gaining favor with consumers. A little more than half (51%) of those surveyed said the current economic situation has made the company’s “no contract” service “more valuable.”

The economy may also boost usage of ad-subsidized mobile service. About two-thirds (66%) of respondents said they were more likely to use programs like VMU’s “Sugar Mama,” which allows customers to earn free air-time minutes by watching and rating ads online. The company says that more than 800,000 customers have opted in to Sugar Mama since 2006.

Still, for VMU, the question is not so much whether current customers appreciate its services, but whether newcomers will flock to them too.”

MRM