US wireless operators run hot and cold on how interested they are in the cash-conscious consumers of the prepaid market. But prepaid is hot now.
AT&T Inc. (NYSE: T) closed its acquisition of Leap Wireless International Inc. (Nasdaq: LEAP) Friday, less than 24 hours after receiving approval from the Federal Communications Commission (FCC) . Shortly thereafter, Sprint Corp. (NYSE: S) announced an entirely new prepaid brand, the aptly named Sprint Prepaid, to sit alongside its Boost Mobile and Virgin Mobile USA Inc. (NYSE: VM) brands. (See Sprint Segments Its Prepaid Subscribers and Sprint Revamps Prepaid Offers.)
The timing might have been a coincidence, but the message is clear: Prepaid is still (or again?) an important battleground for wireless operators. T-Mobile US Inc. has successfully made waves, and AT&T and Sprint plan to respond accordingly. (Verizon Wireless , for its part, is holding strong and maintaining its "meh" approach to prepaid.) (See T-Mobile Leads, Sprint Suffers in Pricing Wars and Verizon's 4G Strength Keeps It Above the Fray.)
AT&T has promised to unveil "the new Cricket" in the coming weeks, promising to "shake up the no-contract segment with a combination of simple, low-cost rate plans; a terrific lineup of smartphones; and a great network experience." (See AT&T Plans a Prepaid Cricket Attack and AT&T's Device Mix Shifts Away From Postpaid.)
Sprint says its new prepaid brand is designed for those customers that don't want a contract, but also don't want to leave the comfort of a big brand. It offers two options and, interestingly, one doesn't even include wireless data, but relies on WiFi, which would seem to put it in competition with some of its MNVOs like Republic Wireless and Scratch Wireless. (See Why WiFi-First Works for Wireless.)
Sprint Prepaid customers can choose between a $45 monthly plan for unlimited talk and text messages, and WiFi-only data, or a $60 plan with unlimited talk and text, and 2.5GB of high-speed data that can be slowed to 3G for video streaming. They can choose between the Spark-enabled Samsung Galaxy S4 Mini, LTE Galaxy 3, or 3G Moto G, or a pre-owned iPhone 4S. (See Sprint Sparks to Reduce Churn, Save Unlimited.)
Prepaid and contract plans run on the same networks, and the prepaid offerings are improving, so you have to wonder if more consumers will see the writing on the wall and ditch their expensive contracted plan for a no-contract offer. It's typically the paltry data offerings or out-of-date handset selection that stops them, but the market will continue to look more attractive the more attention operators pay to it.
If AT&T makes good on its promises with Leap and T-Mobile continues its path of carrier pricing destruction, today's moves might just be the first of many that make contract-free look all the more appealing.
— Sarah Reedy, Senior Editor, Light Reading