Concerned about the risks associated with aggressively pushing traditional prepaid service, Sprint PCS last week unveiled its own version of prepaid service that allows customers to monitor their spending with all calling plans and features, not special prepaid plans.
“The whole prepaid issue has gotten everyone’s attention,” said Sprint PCS President and Chief Operating Officer Andrew Sukawaty in a recent interview with RCR. “Those who have been offering it heavily have experienced problems. The churn is higher and the usage is lower. It has not been particularly a financially rewarding game so far.”
Prepaid service has become an important tool for operators looking to push their services into other market segments and keep acquisition costs down. For many personal communications services operators, prepaid subscribers account for about 50 percent of their subscriber base. But the trick for carriers is to stimulate prepaid airtime use while keeping churn down. Prepaid churn averages about 9 percent each month for U.S. carriers, said Richard Siber, associate partner with Andersen Consulting in Boston. Most prepaid customers use considerably less minutes than postpaid customers.
Sprint PCS already offers prepaid service, but hasn’t pushed the service heavily. The carrier’s new offer, Accounts Spending Limits Program, is an additional prepaid option that should protect Sprint PCS from the traditional prepaid pitfalls and give customers who desire prepaid service access to all postpaid offers.
“It works a little like an American Express card where you have a spending limit, but you’re expected to pay off the limit at the end of the month,” said Ashley Pindell, senior manager of media relations with Sprint PCS.
Under the plan, Sprint PCS customers will be assigned a credit class with an attached dollar amount, $125 or $200. Depending on the assigned credit class, customers may be required to pay a $125 deposit, which is refundable after 12 months with 6-percent interest, assuming a satisfactory payment record. After the credit class is determined and a deposit is paid, if necessary, customers may sign up for any Sprint PCS service plan or promotion and will also be able to roam if using a dual-band handset.
When a customer reaches 80 percent of the spending limit, a text message alert is sent indicating it’s time to make arrangements to pay down the balance. As long as customers pay down the balance, they can continue using airtime.
“This has tremendous appeal to many different segments beyond the initial segment that prepaid was targeting-the credit-challenged,” said Siber. “It should prove to be very widely accepted because it is a national platform that allows national companies to offer product to their employees and manage spending.”
