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Driving Telco Revenue Growth: Strategies to Lower Subscriber Acquisition Costs & Boost Customer Lifetime Value

How The Largest Telcos Reduce Subscriber Acquisition Costs Without Losing Customers

Outline

Introduction

Cheaper?

When it comes to business, we’re always in a constant battle to do more with less. When it comes to acquiring telco subscribers, the question becomes:

“How can telcos grow our subscriber base while keeping costs under control?”

This is the fundamental question driving the need to analyze a telco's Subscriber Acquisition Cost (SAC) and Customer Lifetime Value (LTV).

When it comes to telco customer acquisitions, telcos face pressures like low customer switching costs, undifferentiated offerings, and tech disruptions which drive up SAC.

As a result, four of the highest ad spenders in the USA are telcos like Comcast ($6.2 billion ad spend in 2023) and AT&T ($3.8 billion). Meanwhile, churn remains an ever-present danger, making it harder to recover acquisition costs.1

But what are the key components of a telco’s SAC and LTV? And will this article just be another list of generic strategies?

Hang tight, because after we explore SAC’s key components, we’re going to examine the results of the strategies that some of the biggest names in the industry have tried.

What Goes into Subscriber Acquisition Costs?

A telco’s subscriber acquisition cost looks at the amount of sales and marketing costs spent to win over a new subscriber:

SAC = Total Sales and Marketing Costs / Number of New Subscribers Acquired

Here is a non-exhaustive sales and marketing costs include:

  • Marketing & Advertising – Digital ads, sponsorships, and promotional campaigns to drive awareness and conversions.
  • Sales Commissions, Retail Incentives, and Distribution Infrastructure – In-store staff commissions, third-party dealer fees and infrastructure costs like maintaining physical outlets.
  • Device Subsidies & Bundled Discounts – Discounts on smartphones or bundled services to attract customers.
  • Promotional Offers – Limited-time discounts and free service months to entice sign-ups.

Telcos can break down their SAC by customer type and acquisition channel (e.g., digital marketing, retail sales, partner referrals). This helps identify the most cost-effective acquisition strategies.

Different telcos have their own ways of breaking down SAC components, and much of these costs are not available to the public, but there are still some publicly reported campaigns that we can touch on later in the article.

Breaking Down Customer Lifetime Value (LTV)

SAC calculates the cost of getting a new subscriber while LTV calculates how much a new customer will contribute to a telco’s revenue:

LTV = ARPU x Customer Lifetime (in Months)

To determine the average customer lifetime, telcos typically calculate their churn rate using:

Customer Lifetime (Months) = 1 / Monthly Churn Rate

Analyzing LTV by customer segment, such as customers of individual services or bundled services helps telcos to focus on the customers who provide more long-term value.

How Leading Telcos Are Reducing SAC and Boosting LTV

By adopting digital-first strategies, data-driven personalization, and customer-centric service models, operators can lower SAC without sacrificing retention and revenue growth.

1. Well-targeted Brands, Digital-First Sales & Marketing

Well-targeted digital brands built on sharp consumer insights coupled with digital-first strategies can lower a telco’s SAC by reducing retail expenses and improving conversion rates through targeted online marketing.

“Digital-Native” Telco Branding:

Virgin Mobile KSA cut SAC by 25% compared to the prepaid average by shifting entirely to digital sales and eliminating physical stores during its launch in Saudi Arabia. Virgin Mobile KSA is ‘digitally-born’ and focused on end-to-end digital customer journeys, with physical on-the-ground events being used to supplement their primarily digital footprint.2

This isn’t unique to Virgin Mobile and Saudi Arabia. Circles.Life’s initial journey in Singapore, which rejected physical stores for a fully online approach which allowed us to be the first to provide high value data plans in the country.

Data-driven segmentation and digital campaigns

Circles.Life also employs hyper-personalized marketing through microsegments. These segments are based on multiple factors such as demographics, app and website information and even data usage. 

This lets us build campaigns such as targeting Spotify users with data-focused offers, resulting in a 61% higher email click rate and a 102% higher push notification open rate. Check out more details about this campaign here.

2. Customer-Centric Experiences to Reduce Churn'

With how low telco consumer switching costs have become, investing in delightful customer-centric experiences can increase their loyalty and in turn boost customer LTV.

Putting The Customer First

T-Mobile also invested in OSS and BSS software improvements to minimize order fallouts. By integrating AI solutions into their software, they minimized order fallouts by 95%.3

But this is only part of what makes an experience customer-centric. T-Mobile’s unconventional service model shakes up its customer experience by:4

  • Eliminating contracts and simplifying plan flexibility while ensuring always-on connectivity even in rural areas. 40% of rural T-Mobile customers cited T-Mobile’s coverage as their reason for switching.
  • Enacting loyalty programmes with T-Mobile Tuesdays. A study by consumer loyalty found that 25% of customers are likely to stay with a provider that provides ongoing loyalty programmes and rewards.
  • Contactless purchase and delivery.

T-Mobile’s experiences can be replicated with the right playbook. Circles.co’s digital transformation playbook can help digital telco brands to:

  • Connect: always-on, high value connectivity services with a seamless onboarding experience
  • Delight: produce delightful data-driven customer experiences with loyalty programs to increase customer lifetime value
  • Beyond: when telcos offer everyday lifestyle experiences which go beyond standard connectivity services.

Check out our Digital Advisory Support Services to find out more!

3. High-Value Plans & Strategic Partnerships

Bundle offers are popular in consumer retail like grocery stores, and our research has found that it’s successful for telcos too. Some major telco names are crediting high-value plans and bundled services with higher profits and lower churn rates, improving the SAC-to-LTV ratio.

wim, AT&T’s digital brand in Mexico offers roaming and additional benefits such as entertainment bundles within its community membership such as video and movie streaming, VIP lounge access, live entertainment activities like wellness retreats and restaurants for their Community+ plan. Many wim subscribers had considered other, more expensive plans but decided to go with wim due to the combined value that it offers.

T-Mobile in its annual report noted that integrated packages like MagentaOne outperformed individual products while also having lower churn rates.5 MagentaOne’s (MagentaEINS in Germany) plans provide mobile and fixed lines in a single contract.6 7

Vodafone Idea in India partnered with streaming providers to offer exclusive entertainment bundles. They now offer 400 live TV channels, 10,000 movies, TV shows and more. These bundles help to increase retention without raising SACs.8

Verizon offers fibre and cellular bundles in the United States. That led to Verizon’s $20B acquisition of Frontier Communications to increase its fibre coverage and offer this bundle to a wider audience. Bundles like these widen the moat and could result in lower churn rates and higher LTV. 9 10

The Role of MVNOs in Subscriber Acquisition Costs

While legacy telcos focus on optimizing traditional SAC and LTV models, Mobile Virtual Network Operators (MVNOs) operate with different cost structures. With no physical infrastructure and lean digital-first strategies, MVNOs can acquire customers at significantly lower costs. 

In a follow-up article, we’ll explore how MVNOs leverage their unique business models to redefine customer acquisition economics.

Final Thoughts

Telcos everywhere, especially legacy telcos are now being forced to rethink their acquisition strategies. Instead of relying on mass marketing and costly retail channels, the future lies in digital-first growth, data-driven personalization, and customer experience-driven retention. 

By strategically managing SAC while maximizing LTV, telcos can drive sustainable profitability in an increasingly competitive market.

Are you ready to rethink your telco’s SAC strategy? Let’s build a more sustainable and cost-effective future together.

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