1)Based on data given in the Virgin Mobile case, on average how long did it take for the carriers to break even on the acquisition cost? (6 pts.)

HINT: Break-even time = Acquisition cost / average monthly margin. Please also show how you get the average monthly margin.

2)An important aspect of the cell phone industry is the churn rate. Please answer the following questions in that regard:

a.What is the annual churn rate with contracts? (3 pts.)

b.What is the annual churn rate without contracts? (3 pts.)

c.Consider AT&T. How many additional customers would this firm lose to churn every year if it had no contracts (compared to if it did have contracts)? (5 pts.)

d.If AT&T then had to acquire the same number of customers, what would it cost the firm? (5 pts.)

3)Compare the Customer Life Time Values for with-contract customer and without-contract customer, then explain why most of the carriers require to sign contracts with customers?

e.CLV With-Contract (5 pts.)

f.CLV Without-Contract (5 pts.)

4)According to the results you get from question 1) to 3), please explain the reasons for signing contracts with customers from three different perspectives. (6 pts.)