There's a bit of a cloud now hanging over the mobile prepaid segment as some larger prepaid providers have reported financial results that indicate slower growth.
Most-recent MetroPCS, Leap Wireless and Virgin Mobile USA quaterly results show slower customer growth. This will bear watching. Prepaid had been on a tear over the last year or so so investors are a bit rattled by the slowdown.
Prepaid wireless has been much more popular in Europe and elsewhere in the world than in the United States. About 19 percent of U.S. accounts are billed using prepad mechanisms, according to Pali Research.
In Western Europe, the prepaid share of total mobile connections varies significantly by country, but on average it was 57 percent at the end of 2008, according to the Yankee Group. That might decline to 47 percent by 2013.
In developing markets, prepaid dominates. For example, in Latin America prepaid accounts for 84 percent of mobile connections today. Yankee Group is predicting this percentage will remain flat during the next five years.
There are a couple of big questions about the U.S. market. The first is whether users who seem to be migrating to prepaid because of the recession will stay in prepaid mode after the recession ends. The other question is whether the market segments prepaid represents will change. Up to this point prepaid has been aimed at a lower-income user.
But wtih the growth of prepaid unlimited plans in the $45 to $50 range, one wonders how long it can be before smart phones start to become available, enticing users that would otherwise be buyers of post-paid service.
1 comment:
You quote prepay share of registered lines which is thwart with challengies to really understand the market. As data manager at YG, we are working on ACTIVE lines, rather than registered lines, because it is far too common to have inactive prepaid lines.
Example, I'm British, and have several prepay phones. They cost £1/SIM (if charged at all) and you can pick them up at vending machines at Heathrow or the local shop.
Estimates of the inactive share of prepay SIMs are typically in the tens of percents. SIMs are pushed on people and the amount that this happens depends on the local conditions, channel incentives. Carriers "deregister" a SIM according to arbitrary rules; sometimes never; often 6 months.
It's a phenomenal challenge to meaningfully read prepaid SIM adoption when they're easier to get then a pint of beer. They're disposible items.
Unfortunately for people trying to assess the market, however, is to disaggregate what carriers report (which they rather like artificially inflating with give-away SIMs) from what actually happens in the market.
There's also a difference in how operators treat prepay. In the UK, call prices are typically 5-15p/minute on prepay. A contract typically yields 5p/minute (though of course you get more than just minutes; such as upgrades, data, SMS etc). I have a US prepay too, which is 10 cent/minute, but I have to buy 1,000 minutes to get that price and use about 100 before it expires. (UK minutes only expire after a very long time, and roll-over). It also cost me $100 to buy the US SIM in the first place.
The Yankee forecasts you quote specifically state that it's "registered" SIMs. We do attempt to estimate the active use of prepay SIMs versus the inactive use by applying a defintion of "use in the last 3 months" condition. However, these numbers are deliberatly obfuscated by the operators who try to make it hard for us to make an accurate assessment.
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