The U.S. Prepaid Wireless Market: Year In Review

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The prepaid wireless space looks fairly attractive to U.S. wireless carriers, as prepaid plans increasingly shift from the pay-as-you-go format to monthly billing, with the gap between prepaid and postpaid ARPUs also narrowing slightly. Moreover, customer acquisition and maintenance costs for prepaid users are also lower when compared to postpaid. The four nationwide carriers together added a solid 2 million net prepaid subscribers over the first nine months of 2016, translating into a year-over-year growth of about 70%. Below, we provide a brief overview of the performance of the four nationwide carriers on the prepaid and wholesale front.

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Prepaid_Wholesale_9m_2016

  • T-Mobile strengthened its position in the prepaid space, adding around 1.97 million new subscribers over the first three quarters, driven by promotional activity around its MetroPCS brand and the expansion into new markets, although this was partially offset by some customer migration to the firm’s postpaid business. The carrier saw a moderate increase in ARPU, driven by higher attach rates of mobile data plans.
  • AT&T added about 1.17 million prepaid subscribers over the first three quarters, driven primarily by its value-priced Cricket brand. AT&T’s wholesale net adds remained the strongest in the industry, as connected device net additions (about 4 million) helped to more than offset a decline in MVNO connections (~1.2 million reseller losses). The carrier intends to shut down its 2G network by the end of this year, causing a large number of MVNO customers to disconnect.
  • While Verizon lost a total of around 207k prepaid customers through the first six months of 2016, the carrier’s net adds turned positive in Q3 (83k net adds), driven by new pricing plans (with 5 GB and 10 GB of data), which led to the migration of several lower value postpaid subscribers (3G and feature phone) to the carrier’s prepaid offering. This strategy could allow the firm to keep customers in its fold, without losing them to competitors such as T-Mobile.
  • Sprint has witnessed deep cuts to its prepaid business, with its subscriber base falling by close to 1 million over the first nine months of the year. While this was partly due to stronger competition from AT&T and T-Mobile, the firm has also been de-emphasizing the pay-as-you-go segment, which is less lucrative from an ARPU and churn standpoint. While the carrier expects further prepaid subscriber losses over the remainder of 2016, things should pick up going forward as it focuses on growing the lucrative Boost Mobile brand, while also relaunching the Virgin Mobile brand.
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