The likes of MetroPCS (NYSE:PCS) and Sprint Nextel (NYSE:S) prepaid brands Boost Mobile and Virgin Mobile outhustled Tier 1 carriers in signing up prepaid smartphone customers in the third quarter, according to a new report from research firm NPD Group.
According to NPD's Mobile Phone Track service, in the third quarter 70 percent of smartphone buyers who purchased their phones on a prepaid carrier did so by switching from a Tier 1 carrier. Further, NPD found that the overall penetration of prepaid smartphones rose from 39 percent in the second quarter to 42 percent in the third quarter.
NPD also found that prepaid smartphone sales at traditional prepaid carriers were up 23
percent over the prior quarter, while at Tier 1 carriers prepaid smartphone sales fell 12 percent. Highlighting that trend, executives at MetroPCS, for example, said 62 percent of the phones it sold in the third quarter were smartphones, and that around 50 percent of the carrier's customer base now uses smartphones.
Possibly as a result of this shift, AT&T Mobility (NYSE:T) recently introduced a new $65 prepaid plan with unlimited voice, texting and 1 GB of data. The offering undercuts rival Verizon Wireless (NYSE:VZ) and brings AT&T's pricing closer to other players in the space. Verizon's $80 prepaid smartphone plan, introduced in May, also includes unlimited voice, texting and 1 GB of data. Both plans are more expensive than comparable offerings from MetroPCS, Cricket provider Leap Wireless (NASDAQ:LEAP) and Sprint's Boost and Virgin brands.
"Both AT&T and Verizon have introduced less-expensive prepaid offerings and Verizon has expanded its prepaid smartphone line-up, but questions remain whether it's too little, too late," NPD analyst Stephen Baker said in a statement.
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