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Pay first, talk later with prepaid cell phone plans
[February 04, 2008]

Pay first, talk later with prepaid cell phone plans

(St. Petersburg Times (FL) (KRT) Via Thomson Dialog NewsEdge) Feb. 2--Scared of commitments? But still want a glamorous cell phone with some extra perks?

No worries. Cell phone companies are now aggressively courting prepaid customers with flat fees, unlimited chat time and contract-free deals. Yes, you can even own a popular Razr if you bought Verizon's prepaid deal.

About 10 percent of cell phone users in the United States are prepaid customers, said Julie Ask, an analyst with Jupiter Research. Once an afterthought for wireless frontrunners because of churn rates and low average revenue per customer, prepaid customers are fast becoming the wireless industry's darlings.

"We want them all," said Chuck Hamby, spokesman for Verizon Wireless, which recently revamped its prepaid plans, axing daily access fees on calls and expanding the line of phones available to customers.

The move comes as traditional prepaid giants such as Tracfone, Virgin Mobile, Boost Mobile, a Sprint subsidiary, and T-Mobile are netting customers across the country. At the end of the second quarter of 2007, the four companies combined had 22-million subscribers. Of those, 1.8-million were added in the first half of 2007.

That kind of growth made Tampa businessman Paul Wagner switch to the prepaid market two years ago. The former Alltel dealer said contracts and credit checks made selling harder in the traditional, post-paid market requiring long-term contracts.

Now his cash registers ring every day, he said.

"It's a growing segment," said Wagner, who owns six PCS Plus stores in the Tampa Bay market. His customers are mostly teenagers who work part-time jobs and live off allowances.

"They can pay $45 for a Boost Mobile plan and talk all they want," he said.

Since Boost introduced the flat-rate talk plan last year in select states, including Florida, 20 to 25 percent of all new wireless subscribers are opting for it. The company's unlimited talk-time plan and texting doubled its subscriber base from 224,000 to 500,000 as of Dec. 31, said Andrew Colley, a Boost spokesman.

The plan is an offensive tactic that parent company Sprint is launching against other prepaid regional carriers such as Cricket and Metro PCS, said William Ho, an analyst with Current Analysis.

AT&T spokeswoman Kelly Starling said the service appeals to a variety of people, "those who prefer to deal in cash, those who don't want contracts, parents trying to keep their kids on a budget."

But despite the growth prospects in the prepaid market, analysts don't foresee wireless companies abandoning those long-term contracts.

"The average revenue for a prepaid customer is about $20 to $25 a month, but it's more than double that for a post-paid customer," Ask of Jupiter Research said. "It's less profitable for them."

But customers such as 27-year-old James DeHaan, an employee at a Tampa moulding company, are happy to have the option.

"There are no surprises, no hidden fees, just the same bill every month," he said. "I think everyone will switch over to prepaid someday."


60 percent of prepaid cell phone users are women; 40 percent are men

7 percent of 18- to 24- year-olds are signed up on a prepaid plan

55 percent of prepaid cell phone users have annual incomes less than $44,000

35 percent of prepaid cell phone users subscribe to text services

Source: Jupiter Research

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