US Mobile Prepaid Grows in Strategic Importance

Table of Contents

EXECUTIVE SUMMARY

• In a nutshell
• Ovum view
• Key messages
  • US mobile consumers are switching to prepaid, and more do so in the future
  • Prepaid will become more important to national network operators
  • Hybrid plans are a useful tool for operators
  • But carriers shouldn' t forget the traditional lower-ARPU payas-you-go segment

US MARKET OVERVIEW

• The large network carriers have traditionally shunned prepaid
• Prepaid: the poor relation
• Key prepaid players
  • TracFone
  • Virgin Mobile
  • Metro PCS
  • Leap Wireless
  • Boost
  • Other MVNO players
• Economic conditions will drive prepaid uptake

PREPAID MARKET TRENDS

• Slowdown in postpaid connections growth
• Prepaid evolves into hybrid

OPERATOR POSITIONING

• Strategic landscape

• Market leaders: postpaid still top priority
  • Postpaid is what the market leaders know and are good at
  • Success in winning more postpaid subscribers
  • Both know how to hold onto their postpaid subscribers
  • Postpaid customers are lucrative
  • Postpaid subscribers will drive the use of wireless data services

• Challengers: increasing focus on prepaid
  • T-Mobile struggles to hold onto postpaid subscribers
  • Sprint is resorting to last measures
  • Hybrid plans are a key driver for T-Mobile and Boost in 2009

STRATEGIES FOR HYBRID TARIFF PLANS

• Hybrid plans are a useful tool
• Competition in the hybrid segment heats up

• MetroPCS and Leap are devoted to hybrid plans
  • Dependency on hybrid increases vulnerability of MetroPCS and Leap
  • Expansion is key to growing hybrid base

• Virgin and Tracfone: different strategic paths
  • Tracfone sticking with prepaid
  • Virgin Mobile focuses on hybrid

STRATEGIES FOR PAY-AS-YOU-GO

• The traditional prepaid model shouldn' t be forgotten
  • Pay-as-you-go makes up the lion' s share of US prepaid connections

• Network operators dabble in traditional prepaid
• MVNOs have targeted the prepaid space with varying success
• Operators need flexible payment mechanisms to attract and retain customers

STRATEGIES FOR PREPAID DATA SERVICES

• Carriers need to offer more than just voice to prepaid customers
  • Substituting fixed broadband in the home
  • Data services should be viewed as a way to stabilise ARPU and reduce churn

• Figure 1. Total subscriber market share by operator
• Figure 2. Percentage of prepaid in total customer base
• Figure 3. Prepaid subscriber market share by player
• Figure 4. Prepaid connections, and market share as a percentage of total connections
• Figure 5. US prepaid connections, 2008 - 2013
• Figure 6. Prepaid versus postpaid net additions in the US
• Figure 7. Prepaid, hybrid and postpaid subscription characteristics
• Figure 8. Selected operators' US mobile market focus, 2009
• Figure 9. Pay-as-you-go versus hybrid/unlimited prepaid connections
• Figure 10. Leap' s Jump Mobile tariff

• Table 1. Selected players' prepaid ARPU at 4Q08