Pre-Paid Poaching

3:50 PM -- The contract-free U.S. wireless operators -- MetroPCS Inc. (NYSE: PCS) and Leap Wireless International Inc. (Nasdaq: LEAP) -- both got reamed in the first quarter, left bleeding money and subscribers. But waning interest in pre-paid wasn't to blame. Instead, the culprits were the Tier 1 players encroaching on their territory. (See Cricket Leans on Its Competitors for LTE and MetroPCS Sacrifices Profits for LTE.)

The big wireless operators have shown more interest in pre-paid in a bid to woo the lower end of the market. Sprint Corp. (NYSE: S) and T-Mobile US Inc. have upped their marketing and deals for price-sensitive users, and AT&T Inc. (NYSE: T) and Verizon Wireless are even starting to pay more attention to the low end as the high-end starts to reach saturation. (See Q1 Scorecard: Wireless Operators Square Off on Data, T-Mobile Trashes Device Subsidies and T-Mobile: How Low Can It Go?)

For example, Verizon, traditionally a pre-paid holdout, on Tuesday began offering a $80 pre-paid plan for 1GB of data on the Samsung Corp. Illusion, as well as three pre-paid plans ranging from $15 for 250MB of Long Term Evolution (LTE) data per week, to $90 for 10GB of monthly data on the Novatel Wireless Inc. (Nasdaq: NVTL) MiFi. (See Verizon Unveils New Prepaid Plans.)

Verizon subsidiary Alltel also teamed up with regional operator U.S. Cellular Corp. (NYSE: USM) this week to offer pre-paid plans at Wal-Mart stores in 18 states. (See U.S. Cellular, Alltel Offer Prepaid Wireless in Walmarts.)

More action in the contract-free space is good news for consumers looking for more alternatives, but if the big guys make more aggressive plays, it could continue to hurt the smaller guys that once owned the space.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 5:34:22 PM
re: Pre-Paid Poaching

The contract-free guys actually have data caps too. MetroPCS throttles speeds after it's reached on LTE, but it's easier to adjust the next month to a higher tier, so I think it would help with sticker shock somewhat. Plus, they're just cheaper, which is the main draw.

joanengebretson 12/5/2012 | 5:34:29 PM
re: Pre-Paid Poaching

I've never used a prepaid plan. But I'm wondering if it mightn't be a good way to address data usage sticker shock.

I'm assuming the carrier somehow puts the brakes on if you try to use more data than you've paid for?

sarahthomas1011 12/5/2012 | 5:34:30 PM
re: Pre-Paid Poaching

Anybody out there switch from a contract to a prepaid plan? Would be curious to hear your thoughts on how they compare.

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