With substantial growth expected to come from the prepaid wireless market, national carriers are beginning to pay more attention to the one-time red-headed stepchild of the coveted postpaid customer.
Analyst Fedor Smith of Atlantic-ACM said that as wireless has become more ubiquitous, the expectations of some prepaid customers have risen. They now expect to be able to access the same services that postpaid customers can use, including various messaging services and data services.
“They are upwardly mobile in terms of demand and expectations,” Smith said. He added that while the low-cost, basic voice prepaid customer still dominates the market, a more sophisticated prepaid customer also exists-often falling into the urban youth category between the ages of 18 to 26 years old.
“A lot of them want a basic phone with five-cent per-minute calling. . That’s a market that’s always going to be there. But there are consumers who want more. . They might not have a lot of credit or cash in the bank, but they can still afford to buy high-end sneakers. It’s not that they don’t have any money-they don’t have any credit or reliable cash flow per se.”
A recent study from J.D. Power and Associates found that prepaid customers spent about $38 per month on average when they bought additional airtime.
VZW expands options
Verizon Wireless, which has focused successfully on postpaid customers, recently announced new prepaid plans that, while not necessarily reducing costs for prepaid customers, at least extends the data services they have access to. The plans charge access fees of $1, $2 or $3 per day (only on days of use) and offer a choice of several unlimited options (such as in-network or night-time calling minutes) and access to data services such as music downloads and navigation.
Customers who start an INpulse account with a minimum of $15 can purchase any handset in the carrier’s lineup-including those with access to the carrier’s over-the-air music download service, games and other applications including VZ Navigator-for the same price as customers who sign a one-year service agreement. Pay-as-you-go customers also can now keep their prepaid phone number when they switch plans.
Current Analysis analyst William Ho said in a research note that that carrier is “now getting serious about the prepaid segment” and that Verizon Wireless “cannot ignore the trend of flattening of postpaid growth and the competition’s focus on the prepaid segment as an engine for continued growth.”
Verizon Wireless spokeswoman Brenda Raney said that the new prepaid plans are “a response to customers who want more of our services in general, and it also takes prepaid and it gives it a broader reach.
“The bulk of our business will always come from postpaid, but that does not mean prepaid is not important,” Raney added. “It means it’s one of many options that we feel is important to give our customers.”
Others on board
AT&T Mobility made some changes to its prepaid plans in June, which also expanded customers’ access to data services. However, the carrier took the tack of assembling add-on package options for its GoPhone customers. Prepaid users can pick a package of 3,000 off-peak minutes for $20 and message packages that range from 200 messages for $5 to 3,000 messages for $20. Data options include 1 megabyte of data use for $5 and 5 MB for $10.
T-Mobile USA Inc.-which added 300,000 prepaid customers during the third quarter-now has its Sidekick device available for prepaid customers. The company also introduced a program called FlexPay in July, which lets customers pay in advance for an expanded range of services and contributed to the higher share of prepaid net additions for the carrier in the third quarter.
