Optical/IP Networks

More Growth Predicted for Pre-Paid

Even with iPhone 5 imminent and Long Term Evolution (LTE) launching across the U.S., there is still a steady flow of traffic to pre-paid wireless operators, who, by and large, aren't staking their reputations on the data revolution.

Instead, these cell discounters are focused on value, and it's a message that is resonating with consumers seeking a good deal in uncertain economic times.

The pre-paid market stabilized last month, following a slowdown in May, a report Wednesday from Mizuho Securities USA Inc. indicates. The analyst firm saw an increase in foot traffic in the month of June to MetroPCS Inc. (NYSE: PCS), Leap Wireless International Inc. (Nasdaq: LEAP) and Boost Mobile stores.

Part of the uptick stems from the fact that the success of the pre-paid industry correlates more strongly with the economy than post-paid does. Average gas prices declined 6 percent from May to June, leading more price-sensitive consumers to venture into pre-paid stores, Mizuho analyst Michael Nelson suggests.

These consumers are more concerned with price than with smartphones with the latest bells and whistles. While all of the Tier 1 carriers have their own contract-free plans, the prices are still generally higher – 50 percent higher, in some cases – than what the pre-paid guys offer. (Mizuho breaks the options down in its report, here.)

That being said, the carriers that can combine low-cost pricing with advanced features are the ones who will capture the broadest audience. Nelson believes that MetroPCS is the best positioned to benefit from consumer interest in contract-free plans owing to its LTE network deployment and introduction of cheaper Android phones.

What's more, unlike most of its post-paid competitors, MetroPCS still has all-inclusive, unlimited "Wireless for All" plans that are attracting previously post-paid customers, now faced with tiered data plans. (See MetroPCS Seeks 'LTE for All' Spectrum, Pre-Paid Won't Give Tiered Pricing a Boost and Verizon Confirms the End of Unlimited.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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