Prepaid services continue to advance in the United States and overseas as the market moves increasingly away from the credit-challenged and more toward individuals and companies that see prepaid as a way to manage costs.
According to a report published by Baskerville Communications, the global market for prepaid cellular services could support nearly 264 million subscribers generating $103 billion a year by 2007, compared with the 14.7 million prepaid users that generate $3.7 billion in revenues today.
Other estimates have placed the total number of prepaid subscribers as high as 26 million worldwide.
Western European markets, such as Italy and Portugal, are getting a lot of attention for their prepaid success stories. However, the growth of prepaid in the United States is slower than in some international markets, despite some U.S. wireless carriers-primarily personal communications services providers-reporting that as many as half of their new subscriber additions are prepaid.
“Prepaid has been evolving since about 1993, and it has really taken off in the last year-and-a-half to two years,” said Scott R. Cassell, president of Globalnet Communications, a strategic marketing and consulting services firm. “PCS providers have used prepaid as an entry vehicle to more quickly increase their subscriber bases.
“Marketing programs for prepaid have not been as aggressive and creative in the United States as carriers overseas have been,” continued Cassell. “For example, [U.S. carriers] do not generally utilize market segmentation strategies that are responsive to the consumer.”
A recent report published by Globalnet titled “1998 Global Prepaid Cellular Market Review,” said more than 250 cellular providers in 75 countries now offer prepaid service. The report also noted total prepaid cellular subscribers in Western Europe broke the 10 million mark during the first quarter, but the United States is not expected to reach that mark until 2000.
Globalnet this month announced the winners of its global marketing awards for prepaid cellular programs. Telecom Italia Mobile received the Outstanding Achievement Award for having more prepaid subscribers than any other cellular provider in the world, said Globalnet. The carrier’s prepaid subscriber base exceeds 5 million, which is about twice the size of the entire prepaid base in the United States.
Other award recipients include Colombia’s Comcel, which won the Most Innovative Prepaid Product Award for its Amigo prepaid card, Movilnet in Venezuela for Best Resell Channel Program, Hong Kong Telecom for Best Card Design and Canada’s Rogers Cantel Inc. for Most Creative Advertising Campaign.
The European marketplace encompasses a variety of economic and political environments and prepaid is dominating market growth there, noted Cassell. Most carriers in the United States, he said, are afraid to completely embrace prepaid as a new way of doing business.
International markets may be more successful because distribution channels are more advanced and prices per minute for prepaid are much lower than in the United States, said Cassell. Prepaid also is driven in some international markets by a lack of a reliable credit infrastructure necessary for postpaid systems.
Still, the United States is making progress in the prepaid market.
“There is a lot of pressure,” said David Sult, a wireless analyst with Deloitte Consulting. “PCS pricing is already 10 to 15 percent below current prices. All carriers are scrambling to increase net adds, and they are all looking at prepaid as a way to do that.”
PCS carriers are better prepared to move into a segment such as prepaid, said Sult.
“It’s easier to build a business case around prepaid rather than move the elephant into a new segment like cellular carriers would have to do,” said Sult. “PCS carriers can go after [prepaid] right out of the shoot.
“For cellular carriers to do that would take restructuring of a lot of assets, and that takes time,” continued Sult. “PCS carriers are a little more nimble.”
The image of prepaid as a service for the credit challenged is quickly fading.
Peter Nighswander, an analyst at The Strategis Group, said less than half of all prepaid subscribers fall into the credit-challenged category. More and more customers, he said, are looking to prepaid as a convenience tool to manage minutes.
One caveat Nighswander noted is that the proliferation of prepaid makes it more difficult to measure churn. A customer, he said, might activate service in August, not use the service in September and resume using the service in October. That makes it difficult for carriers to know how to “count” that customer.
