Analyst Angle: The economy helps boost the prepaid market

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Interest in prepaid providers continues to boom. TNS Compete’s behavioral panel tracks the online behavior of millions of consumers across the U.S. Based on this clickstream data, overall Prepaid Prospect Traffic (non-customer traffic to Boost, AT&T Mobility’s GoPhone, Verizon Wireless Prepaid, ToGo, Tracfone, Virgin Mobile USA) has increased 12% year-over-year.
The economy is certainly fueling some of this growth, as a recent TNS Compete survey of over 450 prepaid shoppers indicates:
–73% of prepaid shoppers agreed that they had cut back more on expenses this year compared to last year.
–75% recall having spent more time shopping around for bargains in recent months.
–65% agree that they have cut back on discretionary spending (e.g. eating out, etc.)
In addition to this survey data, TNS Compete has seen the volume of postpaid wireless shoppers looking at prepaid plans steadily increasing. This indicates that consumers are looking for more ways to control their costs in these tough economic times. As consumers become more frugal and economic pressures continue to intensify, cost-cutting and bargain hunting become key tactics for consumers and the prepaid carriers are certainly benefiting.
Although the economy is responsible for some of the growth in the prepaid market, the majority of new interest comes from the introduction of attractive new offers. Most notably, Boost saw the traffic to its site increase 185% y-o-y, in step with the launch of its $50 Unlimited plan in January. This $50 plan offers unlimited talk, text, Web and walkie-talkie. Even today, 9 months after launch, Boost’s Unlimited plan page continues to attract over 40% share of the monthly traffic to Boost Mobile’s Web site. In conjunction with the new plan, Boost continues to grow its footprint and today only trails Tracfone and VZW Prepaid in coverage. However, Boost Mobile’s competitors have certainly been taking notice and are introducing their own versions of unlimited plans to try to capitalize on this growth.
With the introduction of plans like Boost’s Unlimited that includes text and Web, consumers need devices that allow them to take advantage of this increased flexibility. In the past year, we have seen prepaid providers start to offer some more feature-rich, quick messaging devices and MetroPCS even offers several smartphones. But, this still makes up a small percentage of the overall device portfolio. In survey results, TNS Compete saw that 36% of prepaid shoppers want a phone with more functionality. They want to do more with their phone then just simply make calls. Already, we see prepaid customers participating in the following activities:
–80% of prepaid customers are making voice calls at least once per week.
–50% are sending text messages at least once per week.
–20% are playing games, sending picture messages, using the mobile Internet, accessing personal e-mail, and using instant messaging tools.
So, how will the prepaid carriers attract new customers going forward and capitalize on this year’s momentum? We have seen that new plans and advanced features have been successful, but what is next? They need to offer more advanced, feature-rich phones at reasonable prices to ensure that their customers can take advantage of these new plans. Maybe the prepaid providers can achieve this using refurbished advanced phones at a discounted price. But that’s a topic for another day.
Danielle Nohe can be contacted directly at: dnohe@compete.com.