US market boosted by prepay

The US prepaid market saw intense activity during 2009 as growth in contract subscribers dwindled to 1 percent. In contrast, prepaid connections have recorded year-on-year growth of 20 percent. January witnessed the launch of Boost Mobile's (Sprint's prepaid unit) US$50/month 'unlimited' offer that brought them into competition with perceived 'value' operator T-Mobile and regional prepaid specialists MetroPCS and Leap Wireless (the parent of 'Cricket').

In 2008 Sprint’s prepaid connections steadily declined while T-Mobile (prepaid), MetroPCS and Leap Wireless all grew strongly. Less than 12 months later the changed market dynamics were apparent in Q3 2009 results, with Sprint adding 2.1 million prepaid connections over the first three quarters. Despite starting the year with record net additions, MetroPCS and Leap reported weak growth in Q3. Meanwhile, T-Mobile reported its Q3 prepaid net additions fell to only 63,000, from 377,000 a year earlier.

Following the success of Boost’s offer, Sprint announced it would bring a further 5 million prepaid subscribers on board via the acquisition of Virgin Mobile USA (its former MVNO) and adopt a dual prepaid brand approach. Another notable launch was 'Straight Talk' in June by America Movil-owned MVNO Tracfone Wireless, offering a US$45/month unlimited plan running on Verizon's network. T-Mobile USA belatedly unveiled its 'Even More Plus' unlimited offer from US$49.99/month in October.

Given signs that the US economy will remain subdued and with intense competition driving down the cost of unlimited prepaid offers, 2010 will see continuing market growth but individual operators are likely to be squeezed. The nationwide US roll-out of Straight Talk in October - with the distribution strength of Wal-Mart and appeal of Verizon's network - will place further pressure on other players. A long-speculated merger between Leap and MetroPCS would not be a surprise if it finally comes to fruition next year.

(This article is part of a series of predictions for 2010 from the GSMA Intelligence team.)