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After years of exclusive focus on the postpaid subscriber segment in the US, mobile operators are finally beginning to focus on prepaid customers. Recently, Cingular, Verizon Wireless, Virgin Mobile and a few other players have launched new and innovative pricing plans to attract the 41 percent of US residents who still do not own a mobile phone. These efforts will increase uptake in prepaid subscriptions in the US, driving prepaid penetration into the teens and increasing overall mobile penetration to 78 percent.
2005 is the year where prepaid finally takes off the in the US as the larger MNOs compete with MVNOs in offering innovative prepaid pricing plans, marketing and advertising their prepaid services, and in some instances, offering consumers access to their entire inventory of handsets. At YE2004, prepaid penetration in the US stood at a mere 5 percent. Between 2005 and 2010 we expect prepaid penetration to more than double to 13.25 percent, providing the impetus behind the next wave of net additions likely to propel the country to 240m subscriptions by 2010 from the current 174m at YE 2004.
Besides providing ‘less credit-worthy’ consumers with equitable per-minute tariffs and minute bundles, US carriers have smartly avoided ARPS dilution by introducing prepaid plans that charge the subscriber a fixed daily or monthly fee rather than billing purely on per-minute usage. As more operators move to reduce the differences between their prepaid and postpaid plans (with respect to minute bundles and per-minute pricing), we believe prepaid ARPS in the US will stabilize at US$20, while postpaid ARPS increases slightly over the coming years.
Despite the attention given to prepaid, postpaid will remain the driver of growth and profitability in the US. Postpaid will account for 60 percent of all net subscriber additions, and contribute to more than 93 percent of operator revenues through 2010. Needless to say, Pyramid Research expects postpaid subscriptions to maintain their dominance in the US wireless industry.
To read the complete analysis of the US prepaid market, please visit our online store to purchase the latest Americas Perspectives.
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