With a new year beginning and in the quiet before the noise of “tax season” – the busiest season of the year for prepaid carriers, this is a good time to examine four big-picture trends that will impact prepaid competition in 2021 and beyond. They are the closing of the Tracfone acquisition by Verizon, the new emphasis on multi-month plans, new trade-in programs for prepaid carriers and more focus on prepaid for internet access.
Verizon’s acquisition of Tracfone is slated to close in 2021, although a legal expert consulted by Wave7 Research put the odds of a rejection of the deal at 15-20%.
The acquisition would be healthy for Verizon in terms of profitability, but there is great uncertainty, as I wrote in Fierce Wireless in October, about what Verizon will do with the asset.
A prepaid dealer recently told Wave7 Research that some dealers are “scared to death” of what Verizon might do with Tracfone. Potentially, Verizon could invest in distribution and marketing to make Tracfone brands more competitive. For example, Tracfone has 177 Total Wireless Stores. Could Verizon open 1,000 such stores to compete toe-to-toe with Metro by T-Mobile, Cricket Wireless and Boost Mobile? Verizon could, but given Verizon’s debt load, I think it will focus more on margins than on competition.
I expect to see consolidation of Tracfone brands and in fact, that has already started. As seen here and as reported by BestMVNO, Telcel America sales are ending and its customers are being transitioned to Simple Mobile. Telcel America is one of Tracfone’s many brands, as are GoSmart Mobile and PagePlus Mobile. GoSmart Mobile uses 3G data and is not likely to survive, in my view. This is also likely true of PagePlus Cellular whose point of differentiation is that it uses Verizon’s network.
Boost Mobile has just launched a lead offer of six months of unlimited data with advance payment of $240, providing $10/month of savings. Mint Mobile runs TV ads touting multi-month plans. AT&T Prepaid in 2020 heavily touted multi-month plans online. Red Pocket Mobile and Net10 Wireless sell multi-month plans via eBay, as seen here and here. My belief is that carriers are hoping to take advantage of stimulus checks and tax refunds.
However, I am skeptical. Prepaid customers often want to pay as little as possible up front and some are living paycheck to paycheck. I see this as only appealing to a small minority of prepaid customers, but there is certainly a trend of carriers putting more effort into it.
Trade-in programs for prepaid
Trade-in programs are routine at postpaid carrier stores, but this is not true of prepaid carrier stores. Well, not yet. The National Wireless Independent Dealer Association recently reported that Metro by T-Mobile is launching a phone trade-in program. Wave7 Research has been able to confirm this report. As Metro by T-Mobile is the largest U.S. prepaid brand, this is a major development.
There is also some buzz about Boost Mobile looking into a similar effort. If Metro by T-Mobile and Boost Mobile both launch trade-in programs, Cricket Wireless might feel competitive pressure to launch its own program.
More internet access
Tracfone brands such as Walmart Family Mobile and Total Wireless have since 2019 added more hotspot data and have pitched this as a selling point. Straight Talk, Tracfone’s most successful brand, is currently airing a TV ad for its $65/month plan, which features 20GB of hotspot and 100GB of cloud storage. “Be the hotspot,” Straight Talk urged in 2020.
In addition to more hotspot data, some prepaid brands could sell tablets, which is something Metro by T-Mobile does, to provide an additional revenue stream. Will Cricket Wireless and Boost Mobile launch tablet sales in 2021? I think that would be a smart move.
The prepaid market is always evolving, and this will also be true of 2021. Surely there will be surprises. However, we can be confident that the year will involve major change, led by the acquisition of Tracfone – assuming the deal is finalized. Also, we will see new trade-in programs, more of a push for multi-month plans, and more emphasis on hotspot access and on tablet sales. The carriers that execute well on these forces will exit 2021 in a stronger position.
Jeff Moore is Principal of Wave7 Research, a wireless research firm that covers U.S. postpaid, prepaid, and smartphone competition. Jeff has 25 years of telecom industry experience, including 13 years of competitive intelligence work for Sprint. Follow him on Twitter @wave7jeff.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.