Prepaid wireless plans are being elevated out of the dark murky recesses of the “credit-challenged” and “unbanked” markets to become a viable alternative to mainstream postpaid plans. The question hangs in the air, will prepaid specialists eat the big boys’ lunches?
"Postpaid growth is arguably over," was the matter-of-fact assessment of Craig Moffett, an analyst at Sanford C. Bernstein Research.
To wit: The total number of wireless subscriptions increased by 4.4 percent from a year ago, according to Moffett. Within that net increase in wireless subscriptions in the quarter, 80 percent of people signing up for new cell plans signed up for prepaid service, skyrocketing up from topping out at just 51 percent in 2008. The top four prepaid providers – Boost Mobile, Virgin Mobile USA, Leap Wireless and Metro PCS together account for a none-too-shabby 19.1 million subscribers.
Postpaid subscriber growth meanwhile came to a "virtual halt" in the first quarter, he said. Net additions of postpaid customers across all major carriers fell a whopping 58 percent from the first quarter of 2008.
Virgin Mobile USA is the latest poster child for the prepaid trend. It reported its quarterly results on Monday, CEO Dan Schulman noting that "well over the half of the population is willing to actively consider prepaid." Though the operator actually lost subscribers for the quarter, new plans will turn that around, according to the CEO. He also said the shift toward prepaid is massive and undeniable, fueled by falling prices and the willingness of the recession-laden mainstream to look at the low, low prepaid pricing as a boon to the budget, rather than a stigma.
The reason of course is that in a down economy it’s tough to pass up a screaming deal: Prepaid plans across providers tend to come in around $50 per month for unlimited voice, texting and data. Will the rock-bottom pricing cannibalize postpaid segments? Spark a price war? Both?
MetroPCS added 684,000 subscribers, while Leap added 493,000, meaning that both almost doubled their subscription rates compared to a year ago. Boost Mobile gained 764,000 customers in the first quarter, and disclosed plans to open 50 new exclusive retail outlets this year as part of unit President Matt Carter's plan to expand distribution. He says the added visibility will help Boost compete with the larger competition.
