The Future of Prepaid
Emeka Obiodu
Senior Analyst, Telco Strategy
+44 20 7551 9047
[Link]@[Link]
Agenda
What is prepaid?
Why does prepaid matter?
Prepaid as customer choice
Conclusions
Q&A
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
WHAT IS PREPAID?
Evolution of Prepaid Traditional Approach
Per-unit pricing (by min, SMS, MB)
No bundles
Limited handset selection
Voice and SMS only
Mostly cash top ups only
No international roaming
Developed
Markets
Emerging
Markets
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Evolution of Prepaid Current Approach
Monthly plans
SMS and Voice bundles
Session-based, unlimited plans
Wider handset range
Online customer accounts
Online & automatic payment
International roaming feasible
Developed
Markets
Emerging
Markets
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
WHY DOES PREPAID
MATTER?
Prepaid is here to stay!
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
Source: Ovum
0%
2008
2009
North America
Eastern Europe
7
2010
2011
2012
South & Central America
Asia Pacific
2013
2014
2015
Western Europe
Middle East and Africa
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
More so in the US
Prepaid will grow from 19% of total connections in 2010 to 27% in 2015
2010
2011
2012
2013
2014
2015
296.5M
310.6M
324.6M
338.2M
351.7M
364.9M
56.4M
69.9M
77.9M
84.5M
91.4M
98.5M
Prepaid as a % of total
19%
23%
24%
25%
26%
27%
Penetration (%)
96%
99%
103%
106%
109%
112%
Total revenues ($)
$176.3B
$183.2B
$188.8B
$193.5B
$196.9B
$200.7B
Monthly ARPU ($)
$51
$50
$50
$49
$48
$47
Total connections
Prepaid connections
Source: Ovum
8
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
More so in the US
Prepaid will grow from 19% of total connections in 2010 to 27% in 2015
2010
2011
2012
2013
2014
2015
296
311
325
338
352
365
96%
99%
103%
106%
109%
112%
56
70
78
85
91
99
Prepaid as a % of
total connections
19%
23%
24%
25%
26%
27%
Total revenues ($b)
$176
$183
$189
$194
$197
$201
Overall ARPU ($)
$609
$603
$595
$584
$571
Total connections
(millions)
Penetration (%)
Prepaid
connections
(millions)
$560
Source: Ovum
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
US wireless prepaid subscribers, by operator Q4 2010
4Q09
1Q10
2Q10
3Q10
4Q10
Tracfone
14.43M
15.45M
15.91M
16.66M
17.75M
Sprint
10.69M
11.04M
11.21M
11.63M
12.28M
MetroPCS
6.64M
7.33M
7.63M
7.86M
8.16M
T-Mobile
7.03M
4.97M
6.87M
7.07M
7.36M
AT&T
5.35M
5.38M
5.88M
6.21M
6.52M
Leap Wireless
4.95M
5.4M
5.29M
5.09M
5.52M
Verizon Wireless
5.33M
5.19M
4.6M
4.40M
4.41M
262K
295K
324K
324K
313K
US Cellular
Source: Operator quarterly financial reports, Ovum
10
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Prepaid subscriber market share Q4 2010
QoQ -0.27 pp
YoY -0.68 pp
0%
QoQ -0.30 pp
YoY -1.82 pp
Other
8%
Verizon
7%
QoQ +0.27 pp
YoY -0.19 pp
QoQ +0.02 pp
YoY +0.64 pp
QoQ +0.41 pp
YoY +1.95 pp
Tracfone
26%
Leap
Wireless
8%
AT&T Mobility
10%
Sprint
18%
T-Mobile
11%
QoQ -0.07 pp
YoY -0.96 pp
MetroPCS
12%
QoQ +0.12 pp
YoY +0.15 pp
Source: Ovum
QoQ -0.13 pp
YoY +0.88 pp
11
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
PREPAID AS CUSTOMER
CHOICE
Prepaid is now about
13
Customer choice rather than necessity
Abandoning hopes of migration to postpaid
Offering a first-class service to an important segment
An outlet to trial new services, segmentation strategies, payment
methods and price points
Avoiding falling behind your rivals
Convergent billing platform
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Evolution of Prepaid Future approach
Traditional
Approach
14
Current
Approach
Apps and personalized
content
Mobile broadband
Fixed/mobile bundles
Service packages/pricing
based on data usage type
Broad selection of consumer
devices
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Hybrid Offers What would they look like?
Postpaid hybrid plans with prepaid
characteristics
Monthly plan with prepaid add-on
features (bundled messages,
session-based data, international
calling)
Prepaid hybrid plans with postpaid
characteristics
Prepaid, with minimum spend
benefits
Prepaid monthly, no contract
SIM-only plans
Prepaid monthly, unlimited
Corporate flat-rate postpaid with
personal add-on prepaid liability
Family postpaid with prepaid addon lines or service features
Postpaid plans with no term/no
early termination fee contract
15
Prepaid weekly or daily, unlimited
SIM-only
Prepaid with add-on flat-rate
bundled services
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Conclusion
Prepaid is here to stay!
It is no longer about doing a favor to less deserving customers
Prepaid is now about customer choice
16
In the US, prepaid is booming
Hybrid offers merge prepaid and postpaid tariffs
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Thank you!
Emeka Obiodu
Senior Analyst, Telco Strategy
+44 20 7551 9047
[Link]@[Link]