Apr 30, 2011
Prepaid Wireless Revenues To Cross $25 Billion Mark by 2015
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For the better part of the past two years, the unifying goal among competitive prepaid wireless providers – and prepaid wireless units inside wireless giants – has been to make prepaid offerings mimic postpaid offerings as much as possible.
At long last, they are succeeding. In fact, postpaid plans are following prepaid’s lead by offering unlimited everything (or almost everything) for one price.
- Prepaid wireless providers are gaining traction. Revenues were $19 billion last year and will reach $25 billion by 2015, according to ATLANTIC-ACM’s new study,“Perspectives on Prepaid Wireless 2011-2015."
- Pricing is at the heart of this growth (revenue growth is disproportionately lower than subscriber growth), with the most aggressively priced plans for unlimited prepaid falling from $70 per month in 2008 to $25 per month today.
- The appeal of lower rates, particularly when paired with full-feature smartphones, drew many former postpaid customers over to prepaid services. The success of these offerings has not gone unnoticed by the major carriers.
- Verizon, so long the symbol of premium wireless at a premium price, has just introduced a $50 per month prepaid unlimited plan.
- The plan is available in select regions, and is only for feature phones, but is nonetheless a clear sign that Verizon is responding to the offerings of companies like Boost and MetroPCS.
- Prepaid providers also are adapting to widespread consumer demand for smartphones and wireless data. Hence, even though there exists something of a line between basic and advanced services, with postpaid providers pushing premium services and performance over aggressive pricing, prepaid providers are actively working to blur that line.
- The most significant differentiator between the high end prepaid offers, and the offers from Verizon and AT&T, is that prepaid providers are offering truly unlimited data plans.
- Customers who are new to smartphones are going to be the most concerned about going over a data limit and incurring surprise charges, so they are far more likely to pick a plan that has no data limits.
Thus, many of the later adapters, who also tend to be less “tech savvy" about how much data they actually use, will look to prepaid.
- Churn rates are rapidly emerging as differentiators between prepaid providers, with both pricing and smart devices being leveraged by prepaid providers to curb the ease at which prepaid consumers can hop from one provider to another. Our analysis of prepaid wireless churn rates clearly identified that key providers have become effective at ratcheting down churn rates over the past year.
- One of the major drivers of this reduced churn is the previously mentioned smart-phones. A customer who buys an expensive handset for use on one provider’s network has made an investment, and wants to get the most possible use out of that phone, and is unlikely to make another considerable investment in a smartphone for use on a different provider’s network.
- The customer who buys a $10 handset will churn for even the smallest savings; the customer who invests $200 in a handset is more likely to stick around for a while.
- The prepaid and postpaid worlds are slowly converging in terms of plan offerings and handsets. While there are premium providers and value providers, the basics of service plans and the general functionality of available handsets are beginning to converge.
- This trend is likely to continue with users having the option of choosing to pay for their phones up front without contracts, or to acquire discounted phones in exchange for a contractual commitment.
- There always will be a market for ultra premium devices and services (early iPhone adopters, 4G, etc.) that require contracts, just as there always will be a market for the most basic services at the lowest prices.
- Increasingly, however, with one provider-type engaged in mass marketing based on features, speed and reliability, and the other type engaged in marketing activities that drive consumers toward lower-priced options, the product offerings of companies at both ends of the spectrum are being driven deeper into each other’s sweet spots.
Labels:
Mobile News,
News,
Postpaid,
Postpaid customers,
Prepaid,
Wireless Providers
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