Pre-Paid iPhone Parade: Can the Networks Cope?

Cricket Communications Inc. will become the first pre-paid wireless operator to sell an iPhone later this month, and Sprint Corp. (NYSE: S) subsidiary Boost Mobile is rumored to follow in the fall. (See Cricket's iPhone Leap of Faith.)

If the pre-paid iPhone matches the success of its post-paid brethren, the wireless operators may be in for a data tsunami unlike anything they've experienced so far.

The contract-free carriers have had Android smartphones on offer for a while now, but a successful iPhone launch would take data usage to a new level. According to a recent Analysys Mason study, iPhone users consume more data than any other smartphone user and account for 80 percent of the top 10 percent of heaviest data users.

Now there are plenty of reasons a pre-paid iPhone might not appeal to contract-free customers of Cricket, Boost and others -- namely the unsubsidized price tag of $400 and up. But, a $55-per-month data plan makes it an attractive buy for those customers who felt they were missing out on Apple Inc. (Nasdaq: AAPL)'s mobile icon.

Cricket will only sell the CDMA iPhone in select markets where it has PCS spectrum as the phone won't work on its AWS spectrum. It will, however, roam on to any of its 30-plus partners networks, including Sprint Corp. (NYSE: S) and MetroPCS Inc. (NYSE: PCS). The carrier will slow data usage after a customer reaches 2.3GB. (See Cricket Leaps to Nationwide and Leap Revamps Prepaid With Tiered Data.)

Cricket is expecting the iPhone to account for less than 10 percent of its smartphone sales mix for new and upgrading customers, according to spokesman Greg Lund. Plus, it already has 60 percent of its customer base on Android smartphones, and only 5 percent of them use more than 2GB of data per month, he says.

Cricket also regularly adds cell sites and switched EV-DO components that Lund says keep the network up to speed. But, as a few Light Reading commenters have already pointed out, Cricket's network hasn't lived up to speed and reliability expectations in the past.

Independent pre-paid market analyst Whitey Bluestein anticipates Cricket's roaming relationships, which allow it to offload to Sprint and others' networks, will be its saving grace for network capacity. If and when capacity does become a problem, he suggests the carrier dial back iPhone sales in spectrum-short markets. Given Cricket's modest expectations for the device, that could be an easy fix.

That said, he thinks the iPhone will be a good seller in the pre-paid market and worth the upfront cost for the operators, their customers and, of course, Apple.

"While the iPhone handset price seems high, plenty of pre-paid customers will pay for a desirable handset knowing there is no contract, no ETF [early termination fee] and the unlimited plan is well-below comparable post-paid offerings," he says.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 5:31:11 PM
re: Pre-Paid iPhone Parade: Can the Networks Cope?

Boost Mobile getting the iPhone 4 and iPhone 4S makes sense if Sprint is to get the LTE iPhone 5 this Fall. Apple seems to do cheap smartphones by just lowering prices on its older versions, so it makes that Sprint's prepaid brand would offer the older ones. 

I wonder if/when Virgin Mobile will get the iPhone too.

Sign In