The weak economy is driving thrifty consumers to prepaid
wireless companies as they search for cheaper ways to stay
connected on the go.
The weak economy is driving thrifty consumers to prepaid wireless companies as they search for cheaper ways to stay connected on the go.
Prepaid phone plans that average $25 to $50 a month, compared with $50 to $100 or more for monthly contract service, are gaining in popularity.
Their main appeals: lower costs, no contracts and no deposit or credit check requirements.
“Wireless subscribers are becoming more aware of their options and are looking at a prepaid cell phone as a way to save money on their monthly bill,” said Richard Murphy, a wireless and mobile communications research analyst at IDC, based in Massachusetts.
“Prepaid services allow consumers to pay for exactly what they need,” Murphy said.
Consumers such as Pascal Dor of Miami are ditching carriers in pursuit of the best deal.
Dor said he switched from MetroPCS to Boost Mobile about six months ago, lured by the carrier’s $50 unlimited plan.
“It’s a little bit better,” he said while checking a service issue recently at a Boost store in Davie.
Radical belt-tightening by consumers burdened with financial worries has helped fuel demand for more affordable wireless.
This in turn has increased competition among prepaid companies as they vie to retain or gain market share.
Boost introduced a $50 unlimited plan in January 2009, offering unlimited nationwide talk, text, Web and walkie-talkie for the flat rate. Other prepaid carriers soon followed with similar or lower-priced deals.
“People are definitely running with it,” said Barbara “Bobbie” Outerino, Boost’s South Florida marketing manager.
In the first nine months of 2009, Boost – the prepaid division of Sprint Nextel – had more than 121 percent subscriber growth in the South Florida market year-over-year, said Neil Lindsay, chief marketing manager for the telecommunications company based in Irvine.
The increase in subscribers came largely from the popularity of the $50 unlimited plan.
Dallas-based MetroPCS Communications Inc. – a longtime no-contract wireless player in South Florida – offers plans from $30 to $45 for monthly service. Its $45 “Ultimate Unlimited” plan includes unlimited local calls, text messaging and nationwide calls, among other features, within the United States and Puerto Rico.
Those plans offer consumers a “great degree of predictability at significant savings” said Mike Ward, MetroPCS vice president and general manager for Florida.
Such features are attractive, particularly when “the economy gets a little sour and people’s pocketbooks are pinched,” he said.
MetroPCS had roughly 6.3 million subscribers nationwide as of September, but added 66,157 net customers in the third-quarter 2009 – fewer than it expected, according to a company report.
Boost, which runs on the Nextel network, had 5.7 million customers nationwide at the end of September.
Last November, Sprint acquired prepaid rival Virgin Mobile USA for $483 million to further bolster its presence in this growing segment.
“Prepaid is growing at an unprecedented rate with consumers keenly focused on value,” Sprint’s Chief Executive Officer Dan Hesse said in a statement announcing the purchase.
Sprint has been struggling of late to retain contract customers. In the first nine months of 2009, it had a net loss of roughly 3 million contract customers, while its prepaid business boomed.
According to IDC, the prepaid sector accounts for roughly 20 percent of the U.S. wireless market. And by the end of 2013, IDC is forecasting nearly 72 million U.S. prepaid wireless users, up from more than 48 million in 2008.
While prepaid plans can simplify wireless service for some customers, settling on the right plan or carrier can be a challenge. But there are ways to evaluate the growing options available.
A recent J.D. Power & Associates wireless study found users of pay-as-you-go prepaid plans such as those offered by NET10 and TracFone were more satisfied than users of non-contract monthly plans when considering performance and reliability, cost of service and account management issues.
Miami-based TracFone Wireless was the top-rated U.S. prepaid carrier in overall service in a Consumer Reports survey conducted last fall. The carrier, which has more than 12 million customers nationwide and its affiliated brand NET10, sell low-cost cell-phones and airtime minute cards that customers can purchase to get service as needed. Another brand, Straight Talk, offers bundled talk, text and Web time for 30 days for a flat rate.
IDC analyst Murphy expects TracFone, which has more than 23 percent of the U.S. wireless prepaid market, to retain its top ranking through 2013 as its plans not only appeal to cell-phone consumers seeking savings, but targets those who aren’t heavy wireless users.
Officials from TracFone could not be reached for comment.
Telecom giants Verizon Wireless and AT&T also see value in offering prepaid or no-contract plans that appeal to the budget-minded, although contract plans are more lucrative.
“There’s certainly been increase interest in (prepaid), especially given today’s economic climate” Verizon spokesman Chuck Hamby said.
Hamby said prepaid offerings have become an attractive option for small businesses and parents with teenagers.
“Some parents choose the prepaid option for their children because it allows them to control cost and usage,” AT&T South Florida spokeswoman Kelly Starling said. AT&T offers prepaid service under its GoPhone brand.
For the past four years, Southwest Ranches resident Desmond Depass has been fairly happy with his T-Mobile service.
“Service is real good compared to Sprint Nextel and AT&T, which don’t work in my house,” he said on a recent visit to a T-Mobile store in Miramar to refill his son’s prepaid phone.
But if he could change anything, it would be even lower phone and service prices.
“I wish they were a little bit more economical like MetroPCS,” he said.