Summary
TracFone reselling Verizon network with the unlimited non-contract offer in Wal-Mart could impact rechargeable prepaid with AT&T.
Analysis
Under the parent company of America Movil, TracFone has been effective in reselling for multiple carriers and refurbishing handsets for both CDMA and GSM networks. And besides the expansion in Wal-Mart, TracFone has merchandised phones in major retailers such as Target and Kmart and mini-marts like 7-Eleven and Chevron. Different from the new unlimited Straight Talk that is monthly non-contract on Verizon, TracFone has been doing rechargeable or top-up prepaid with AT&T. Before the launch of Leap and MetroPCS, AT&T would report net adds for the holiday fourth quarter being over 50% such as 4Q2007 was 1.5 million prepaid on 2.7 million net adds. About half of TracFone’s over 10 million subscribers are on AT&T. With the ARPU being only about $10, the revenue is not significant for AT&T results. However, AT&T might be scampering to preserve its subscriber count in 2010 quarterly reports. Verizon is the winner as TracFone migrates from sporadic rechargeable to monthly non-contract, similar to how Leap Wireless shifted from Jump to the Cricket services.
Gregg Kail consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
