Low-cost iPhones stoking competitive prepaid market

Source: gap intelligence

The prepaid market has become a feeding frenzy for carriers over the last 18 months, and Apple is chumming the water with cheap iPhones.

Apple began to pursue the prepaid market more aggressively in 2016, as the market research firm gap intelligence noted in September, and that pursuit has only grown more ambitious over the last year. The iPhone’s prepaid retail channel placements more than doubled from the second quarter of 2016 to the second quarter of 2017, growing from 15 SKUs to 46 SKUs, and they increased 35% from the first quarter of this year to the second quarter, according to fresh data from the San Diego-based firm.

Meanwhile, Apple secured a new prepaid distribution deal through Costco in the second quarter, and it increased prepaid retail placements at AT&T (up 200% quarter over quarter) and Best Buy (up 125% quarter over quarter), according to gap intelligence. The iPhone has seen 15 new retail placements across five prepaid carriers recently, gap intelligence said.

And although Apple has long protected its status as a high-end brand, the company appears to be willing to sacrifice some hefty margins to claim a larger share of the prepaid market, Wave7 Research noted.

“During 2Q17, one major trend was the rise of low-cost iPhone SE, 5S, and 6 models for prepaid,” Wave7 noted in a recent report to subscribers, citing gap intelligence’s data. “Specifically, AT&T GoPhone, Verizon prepaid, Total Wireless, and Simple Mobile have all recently launched <$200 iPhone models, gap intelligence has reported, and MetroPCS recently launched the $199 32GB iPhone SE. For base models, Straight Talk as of 7/3 is selling the iPhone 5S for $99, the iPhone SE for $159, and the iPhone 6 for $199. Boost sells the iPhone 5S at $49.99 for porting customers.”

The trend illustrates the fact that competition in the prepaid market has spilled over from the postpaid segment as growth in the U.S. smartphone market has stalled. T-Mobile, AT&T and Sprint in March all extended their unlimited data offerings to prepaid, and Verizon last month lowered the pricing for its tiered prepaid plans and increased the amount of data available in each plan, complementing its own unlimited prepaid offering.