Significance of Prepaid - Connected Corners

Rise of Prepaid – Spotlight on wireless carriers’ silent achiever & 6 key benefits

This topic casts a spotlight on the growing significance of Prepaid propositions in an Equipment Installment Plan (EIP) Postpaid era as well as the mid-long-term benefits the category presents to Wireless Carriers & subscribers alike

As iPhone X finally launches, wireless carriers worldwide (particularly those in EIP mature / saturated markets e.g. U.S) are hoping for the $1000+ device to boost their Postpaid take-up & upgradesbut silently in the background another hero has been emerging!

This first segment in a multi-series topic explores growing significance of Prepaid proposition in an Equipment Installment Plan (EIP) Postpaid era as well as the mid-long-term benefits the category presents to wireless carriers & subscribers alike

Many wireless carriers continue to place high emphasis on their Postpaid propositions… and rightfully so… after all this traditional (subsidy + term-commit) model “guarantees” predictable revenue stream (ARPU, CLV) & subscriber tenure (e.g. 2 yrs) vs. its ‘traditional Prepaid brethren

Quick Note: Generally speaking, wireless carriers are increasingly becoming unique (asset ownership, strategic direction, partnerships, subscriber segments targeted, ARPU mix, etc.) and as such their consumer propositions mix (Postpaid / Prepaid, Subsidy / EIP, etc.) would also vary accordingly to suit their short & long-term goals

EIP Postpaid – still reliant on that next iconic phone!

Transition to EIP Postpaid

Pioneered by T-Mobile; U.S wireless carriers began transitioning from traditional subsidy-focused Postpaid model to that of a Equipment Installment Plan (EIP) that required subscribers to finance (or lease) the “full cost” of device

Fueled largely by the launch of ‘all new’ iPhone 6 models, EIP Postpaid propositions proved to be a runaway SUCCESS! Subscribers en-masse vying for the new iconic iPhone signed up to these EIP plans in droves!

Furthermore, the integrated Buy Back, Trade-In & Upgrade (BBTIU) programs – designed to encourage subscribers to (perpetually) turn in their working smartphone for the new iconic phone (with varying degree of conditions) – also seemed to support the EIP Postpaid uptake / upgrades initially

So did smartphone subsidies really disappear?… Not Reallythey’re lingering around in myriad of ‘re-engineered’ forms [more on that in a separate post]

Challenge facing EIP Postpaid

EIP/BBTIU Postpaid propositions are highly reliant on the ‘popularity & perception factor’ of the (handful) underlying iconic smartphone & their iterations (mainly iPhone)

As is 2016 witnessed one of the slowest smartphone growth rate in recent times & though research firms like Gartner & IDC predict modest growth in the near future… most of it would come from low-mid end tier devices (not the typical EIP Postpaid range candidate – rapid price erosion & low residual value)

Additionally, despite a flurry of promotions in recent times, BBTIU programs are seeing limited success in boosting or maintaining EIP Postpaid upgrade (re-contract) rates

Key cited reason: Increasingly, subscribers who’ve ‘paid-off‘ their expensive smartphone EIP contract are reluctant in upgrading (read: re-committing to a new device EIP contract) to iterative models with little / no perceived value proposition (price vs. features)

To what extent the recently launched iPhone X alters this trend is yet to be seen; given its higher cost, softer Carrier subsidy offers and low supply

For any Carrier, this high dependence of EIP Postpaid on select iconic smartphones (& subscriber’s perception thereof) could risk long-term EIP Postpaid growth… and sans viable alternatives may also risk losing their subscribers to their competitors

Enter Prepaid… Rise of the Silent Achiever!

Simultaneously, the Prepaid (incl. BYOD) category has been growing… in part fueled by this very (sizable) subscriber base who exit their EIP Postpaid contracts, but prefer to stay with their current wireless carrier (network coverage / multi-play / price / loyalty / etc.)

At the very least, Prepaid (when done right) acts as a natural barrier against network-churn out

Prepaid Grows in EIP World - Connected Corners

Growing significance of Prepaid category

Recent focus on Prepaid across top 4 U.S wireless carriers further highlights the significance of the category – 

  • AT&T (& Cricket) and T-Mobile (& MetroPCS) lead domestic Prepaid category growth with some propositions designed as ‘similar-to-Postpaid‘ (incl. Unlimited data option)
  • Even Verizon with a low ~5% Prepaid base has recently begun taking it’s Prepaid  quite seriously by competitively overhauling the entire value proposition
  • Having seen recent success on Postpaid front, Sprint too has turned it’s focus back on Prepaid propositions, most notably with it’s re-launched Virgin brand

As outlined earlier, Prepaid is not only a volume driver (subscriber adds) but is also helping Carriers realize increasing revenue growth (ARPU) in recent quarters… Suffice to say that Prepaid category is soon becoming a silent achiever for even the most ‘Postpaid-focused’ Carriers

How Prepaid Benefits wireless carriers

Modern Prepaid propositions allows wireless carriers the flexibility of designing a profitable proposition whilst appealing to an even broader set of subscribers due to its inherent ‘no-commitment / no credit check’ nature

#1. Prepaid benefits wireless carriers in more ways than one

6 Benefits of Prepaid to Carriers - Connected Corners

#2. Prepaid is a key moving cog in the holistic ‘proposition machinery’

Prepaid - Key moving cog - Connected Corners

#3. Prepaid – The ‘Swiss Knife’ of propositions

The multi-utility nature of Prepaid category in influencing (& controlling) network-level subscriber acquisition & retention aptly makes it the ‘Swiss Knife’ of consumer wireless propositions

Versatile Prepaid Propositions - Connected Corners
* sustainable growth risk as outlined above


Inherently flexible and with broader subscriber appeal, modern Prepaid propositions can also be ‘tailor-made’ to maximize subscriber tenure (CLV) & ARPU (revenue) metrics for wireless carriers

Modern Prepaid goes beyond just data, text & voice and into ‘Postpaid-matching’ enhanced value propositions that can aid wireless carriers achieve their long term subscriber & revenue goals

Stay tuned! to explore various Prepaid models and how they can cater to a wider subscriber audience (including the high-spend ‘EIP exiters’), role of subsidy vs. Prepaid EIP, ancillary bundling, etc. in forthcoming segments