June 11, 2007
Prepaid is for developing nations
Analysis of:
AT&T Rolls Out GoPhone Pay As You Go Feature Packages | www.att.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Implications: High penetration of credit card usage and not having implemented "calling party pays" will make prepaid services in the US a commercial proposition with very limited appeal for both voice and data.
Analysis: Two conditions are necessary for prepaid services to be successful (widely adopted):
+ The introduction of calling party pays (which is not implemented in the US). So operators can heavily subsidize handsets and offer low prepaid tariffs (adding the revenue of entrant calls to the mix).
+ A low penetration of credit cards. Low penetration of credit cards it's a consequence of several factors (few population with a steady income, most population working outside the formal economy, etc.) that make difficult to for customers to sign contracts and for operators to collect monthly fees.
Last time I checked there was a .87 correlation among credit card penetration and adoption of postpaid mobile services (using data from the Bank of International Settlements and ITU).
None of those conditions apply to the US, where prepaid will stay as a niche proposition (for voice and data)
Mexico which is exactly the opposite case has more than 90% of prepaid users.
Analysis: Two conditions are necessary for prepaid services to be successful (widely adopted):
+ The introduction of calling party pays (which is not implemented in the US). So operators can heavily subsidize handsets and offer low prepaid tariffs (adding the revenue of entrant calls to the mix).
+ A low penetration of credit cards. Low penetration of credit cards it's a consequence of several factors (few population with a steady income, most population working outside the formal economy, etc.) that make difficult to for customers to sign contracts and for operators to collect monthly fees.
Last time I checked there was a .87 correlation among credit card penetration and adoption of postpaid mobile services (using data from the Bank of International Settlements and ITU).
None of those conditions apply to the US, where prepaid will stay as a niche proposition (for voice and data)
Mexico which is exactly the opposite case has more than 90% of prepaid users.
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