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Next-Gen Service Provider: May 12, 2009 eNewsletter
May 12, 2009

Prepaid Wireless Service Posts Positive Gains in Sour Economy

By Amy Tierney, TMCnet Web Editor

The weak economy apparently isn’t having a negative impact on prepaid wireless service carriers. First quarter results show some hefty gains in the number of customers who prepay for their wireless minutes without signing a contract, with TracFone Wireless leading the way.



 
TracFone, the U.S. prepaid unit of America Movil and the largest carrier of subscribers, ended the first quarter with 11.8 million, according to a Wall Street Journal report. And the affordable price of prepaid-wireless phones may be driving consumers to the carrier. Tracfone has phone service available for as low as $20 for a three-month period.
 
Meanwhile, MetroPCS and Sprint (News - Alert) Nextel’s Boost Mobile gained the most new subscribers. MetroPCS added 684,000, while Boost Mobile attracted 674,000. Boost’s unlimited plan, which costs users $50 a month, was a likely draw that attracted new subscribers.
 
Leap Wireless gained 492,753 new subscribers in the first quarter, while Virgin Mobile (News - Alert) reported a net loss of 133,292 subscribers. Virgin was the only prepaid company that reported a loss in its subscriber base.
 
Prepaid-wireless telecoms accounted for about 80% of the cell phone industry's growth in the first quarter. Pay-as-you-go services are often attractive options for consumers during a recession. For one, they are less expensive than traditional contract-based wireless plans. In addition, they are convenient and don’t require stringent rules often enforced with contract plans. And a growing number of users report increased satisfaction, thanks to new services and staggered pricing options.
 
The U.S. growth in prepaid cell phone plans, however, is only a fraction of the number of subscribers in Europe. Those plans have been popular overseas for several years. For instance, Brazil has the fifth largest mobile market in the world. And of the country’s 133.15 million mobile users, more than 80 percent are prepaid subscribers, according to the Wireless Federation.
 
In wake of a sour weak economy, value and customer service mean more than ever.  MetroPCS is one example. The carrier in January added a new feature to its service that lets subscribers manage their account on-the-go.The feature, called myMetro, includes real-time account updates, and is available free for MetroPCS users.
 
Of all prepaid wireless carriers, many subscribers favor flat rate plans for cost savings. Those customers generally report higher satisfaction versus users with per-minute price plans.
 
Despite the first quarter increase in the prepaid market, Craig Moffett, senior analyst at Bernstein Research, is skeptical that the numbers will carry through to the second quarter.  The results, he said, likely include a double-counting of pre-paid subscriptions. For instance, prepaid subscribers could remain on the books even after they stopped using the service.
 
 “Given these policies, in any given ‘normal’ quarter, there is some degree of double-counted subscribers built into the total subscriber base,” Moffett wrote in a research note.
 
Analysts remain uncertain whether an economic rebound will cause prepaid subscribers to return to contract-based plans, or remain with their current offerings.  Only time will tell.



Edited by Amy Tierney

(source: http://telecom-expense-management-solutions.tmcnet.com/topics/enterprise-mobile-communications/articles/55989-prepaid-wireless-service-posts-positive-gains-sour-economy.htm)








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