AT&T Wireless Services Inc.’s recently launched GoPhone service could signal the beginning of an evolution in the wireless prepaid market that will result in carriers placing more emphasis on offerings designed to attract consumers who for one reason or another are not interested in traditional postpaid offerings, according to a report from research firm Compete Inc.
The service, which was launched in early May, is similar to traditional prepaid offerings in that it does not require customers to pass a credit check or sign a contract. Instead, GoPhone customers are required to present a credit-card number or bank-account number that is automatically charged a fixed amount whenever a customer surpasses a certain amount of calling minutes, which are priced similarly to AT&T Wireless postpaid offerings.
In its study of the GoPhone service, which Compete said was conducted using early online indicators of purchase intent and total demand to determine if the service was appealing to consumers AT&T Wireless was targeting, the research firm noted the service has attracted an increasing number of consumers to the carrier’s Web site and has appealed to a pair of under-penetrated market segments, including credit-challenged consumers and those seeking convenience.
“Early indications are positive for GoPhone,” said T.J. Mahony, senior wireless analyst at Compete. “AT&T Wireless has succeeded in capturing interest from under-penetrated market segments that are important for its long-term growth.”
Mahony added that the GoPhone launch signaled an “evolution” in the wireless market that in the past had treated prepaid offerings as a consolation prize for consumers who did not have the credit to sign up for more cost-efficient postpaid offerings.
“Prepaid services have been sold as a secondary offering to customers who did not meet credit requirements,” Mahony explained. “GoPhone on the other hand has been sold as just an offering for customers who don’t want to be tied to a contract.”
The survey found that following the GoPhone launch, AT&T Wireless has attracted an increasing number of “deliberate” online consumers and that purchase interest levels increased from 20 percent in early May, which was on par with Verizon Wireless and Cingular Wireless L.L.C., to an industry-leading 28 percent by the end of its first month.
Compete explained that the results meant more than one-quarter of consumer interest in mobile phones or service plans was directed toward AT&T Wireless’ Web site during the week of May 25.
Compete’s survey also found that the GoPhone offering has attracted a higher percentage of young consumers making less than $30,000 per year than AT&T Wireless’ traditional services as well as a higher percentage of more mature and price sensitive consumers over 55 years old who make less than $30,000 per year.
In addition, and perhaps most importantly to AT&T Wireless, the survey found only 10 percent of interested GoPhone consumers were existing AT&T Wireless subscribers, suggesting the service was not cannibalizing from the carrier’s postpaid customer base. Compete noted the high interest from non-AT&T Wireless subscribers was in contrast to Cingular’s Rollover Minutes campaign from last August that despite being offered only to new subscribers drew interest from nearly half of Cingular’s existing customers.
“Rollover was born as an acquisition tool but ended up as a retention tool,” explained Mahony.
While potential GoPhone customers were for the most part not existing AT&T Wireless subscribers, Compete found they were about two times more likely to consider a traditional postpaid carrier than a prepaid carrier such as Virgin Mobile USA L.L.C., TracFone or Boost Mobile L.L.C.
AT&T Wireless spokesman Ritch Blasi said the carrier has been happy with the success of its GoPhone offering, noting it has been “doing better than expected.”
Compete said it plans to continue to monitor GoPhone’s impact on AT&T Wireless as well as how other carriers will react to the offering.
“For the wireless industry as a whole, it will be important to assess GoPhone’s ability to sustain its momentum and determine if the lifetime value of GoPhone consumers merit emulating the strategy that AT&T Wireless has adopted,” Mahony concluded.
