Smartphones are becoming more accessible for individuals who
do not want to sign multi-year mobile service contracts. As a
result, carriers relying on postpaid phone service contract
growth are feeling the pinch on their bottom lines. Will these
carriers resort to innovative service bundles to unlock consumer
value, or is the industry looking at a round of consolidation
sometime in the near future?
Consumers can choose from two primary types of phone service
plans: prepaid and postpaid. In prepaid plans, users pay for
minutes and data as needed. One example of a prepaid service
provider is TracFone Wireless. A postpaid plan is a contract that
users typically sign for a commitment period of one to two years.
These users pay for a set number of minutes and data on top of
the cost of a phone. Sprint (NYSE:
) is one example of a postpaid service provider.
Postpaid plans are popular largely because they often offer
users higher quality phones than prepaid plans. However, Apple's
) iPhone has recently become available across several prepaid
Leap Wireless' (NASDAQ:
) Cricket and Sprint's (NYSE:
) Virgin Mobile might only be the first of many no-contract
iPhone deals coming soon. In a sign of the difficult economic
environment, lower-income consumers are not the only customers
gravitating towards far cheaper, no-contract options.
show tempering growth of postpaid subscribers. That growth was
just one percent for 2012's first quarter, according to Chetan
Sharma, a mobile industry analyst. That compares to a growth of
around 15 percent for prepaid subscribers over the same
As data becomes more available for prepaid phone service plan
users, traditional postpaid mobile players such as Verizon
) and AT&T (NYSE:
a feature prepaid providers have not yet tapped: shared data
plans. Verizon Wireless is expected to have its "Share
Everything" family plan by the end of June. This plan allows
subscribers to share data with as many as 10 devices to the
AT&T may also be considering adding new data plan options.
The company's CEO, Randall Stephenson,
that the carrier might offer data-only plans within two years.
Further out, Stephenson and other industry insiders see postpaid
plans becoming part of larger bundling in the mold of cable,
internet and home phone services.
In order to cope with harsher prepaid competition, large
mobile players might simply consider acquiring high-growth
In a note, Sharma said, "The AT&T-T-Mobile merger might
not have gone through but that doesn't stop industry to play the
M&A speculation parlor game. Except for a few impossible
scenarios, all sorts of deals are being contemplated. The market
economics is clearly crying out for more consolidations."
To this end, large players like Verizon or Sprint Nextel might
consider acquiring a company like T-Mobile USA to gain exposure
to the prepaid phone service market . Small-cap regional players
such as Leap Wireless might be even more immediate candidates for
Friday, the Vanguard Telecommunication Services ETF (NYSE:
) traded around 0.4 percent higher for the session.
(c) 2012 Benzinga.com. Benzinga does not provide investment
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