Competition for No-Contract Market Gains Steam

Verizon Wireless, AT&T and other major wireless carriers are focusing on a class of customers they once largely ignored: bargain hunters with a fear of commitment.

With the market for two-year-contract phones saturated, large carriers are marketing aggressively to those who seek to prepay for minutes and data without a contract.

Smaller carriers that specialize in no-contract plans are stepping up to the competitive pressures with better devices and faster networks. Cricket and Virgin Mobile USA both announced recently that they will start selling no-contract iPhone 4 smartphones later this month.

Major carriers “are focusing on prepaid as a growth engine,” says analyst John Weber of IDC. The research firm estimates the prepaid market will grow 7.4% a year on average until 2016.

The marketing shift comes as growth plateaus among customers who lock in long-term contracts in return for phone subsidies. The number of those customers fell in the first three months of this year vs. the fourth quarter, the first quarter-over-quarter decline in industry history, says research firm Recon Analytics.

Recent moves in the prepaid market:

  • Verizon Wireless launched a prepaid plan in April with unlimited voice and text and 1 gigabyte of data for $80 on its 3G network.
  • AT&T started selling in April a new plan that offers 1 GB of data for $25 a month, doubling the data amount offered in previous prepaid plans.
  • T-Mobile added a no-contract plan last year that lets customers use any phone in its lineup.
  • Sprint said in April that its two prepaid service subsidiaries, Virgin Mobile USA and Boost Mobile, will deliver voice and data on WiMax, its fastest network.

Such moves “will further tip the scales in the (large) carriers’ favor,” says Deepa Karthikeyan, an analyst at Current Analysis.

But smaller prepaid-plan providers aren’t standing pat. Cricket, a prepaid brand owned by Leap Wireless, launched Muve Music service last year, giving customers unlimited song downloads for a monthly fee. Its iPhone 4 goes on sale June 22 and will cost $399.99 with a $55-a-month plan.

Virgin Mobile USA’s iPhone 4 goes on sale June 29 and will cost $549 with a $30-a-month plan.

MetroPCS launched its 4G LTE network in 2010 and in August begins selling its first LTE-capable smartphones. They are priced below $150.

“Prepaid carriers are more nimble and can experiment with newer pricing and service models,” Karthikeyan says.

(Source: USA Today, 06/08/12)

Author: alisonsawhill

Marketing and Advertising Manager, 20+ years of success, working with clients on a local, regional and national level. Experienced in strategy, development and execution of clients marketing plans using all media tools, including Radio, Internet, Social Media, Events and Promotions.

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