As the U.S. wireless industry hurtles toward the critical fourth-quarter holiday shopping season, no-contract carriers are rushing to bolster their smartphone offerings in a bid to challenge postpaid rivals with the latest in flashy, high-end handsets. Indeed, smartphones represented 13.5 percent of all global handset sales in the first quarter, according to research firm Gartner, and are expected to dominate phone sales in the coming years.
The latest indication of smartphones trickling into prepaid comes from two of Sprint Nextel's (NYSE:S) no-contract plays. In the past few days, both Boost Mobile and Virgin Mobile disclosed plans to offer high-end smartphones with service plans significantly cheaper than those available from parent Sprint. Specifically, Boost today introduced the Research In Motion BlackBerry Curve 8530 for $249.99 with unlimited, prepaid plans at $60 per month, just a day after Sprint's Virgin Mobile announced it will sell its first Android phone, the Samsung Intercept, for the same price with unlimited plans also at $60 per month.
Virgin's pricing for the Samsung Intercept Android phone is worth comparing with Sprint's pricing of the device. Sprint first introduced the Intercept in July, and it currently offers the gadget for $99 with a contract and unlimited service at $99 per month. The total cost of the device and 12 months of service on Sprint's postpaid plans totals $1287.99, before taxes, while Virgin offers the Intercept and 12 months of service for $969. Sprint last year acquired Virgin for around $483 million.
"One of the biggest differences between the postpaid and prepaid segments has been the phone restrictions that prepaid customers have had," wrote Current Analysis' Maidy Whitesell in a recent research note. "As smartphones seeped into the consumer mindset, postpaid customers were the early beneficiaries. However, more prepaid providers have started offering smartphones, though selection remains thin."
Whitesell pointed out that T-Mobile USA first introduced prepaid smartphones in 2008 via its FlexPay offering. Boost soon followed with a BlackBerry, and Leap Wireless (NASDAQ:LEAP) and MetroPCS (NYSE:PCS) joined the effort this year with BlackBerry and Android devices. Interestingly, Verizon Wireless (NYSE:VZ), the nation's largest wireless carrier, recently jumped into the game by offering a $30 prepaid data package for its full lineup of smartphones. Aside from a few exceptions, most prepaid smartphones go for around $250 with unlimited service at $60 per month.
"As price-sensitive consumers try to find ways to cut their costs, the prepaid segment clearly offers more savings without fear of a long-term commitment," Whitesell noted. "In fact, prepaid wireless subscribership represented over 20 percent of total subscribers in the U.S. as of 2009."
Of course, a few high-end gadgets remain stubbornly attached to postpaid plans, notably Apple's (NASDAQ:AAPL) iPhone.
- see this Boost release
- see this Virgin release
Verizon launches prepaid data for Android, BlackBerry phones
MetroPCS takes on Boost, debuts BlackBerry
Leap posts Q4 loss, but sets sights on smartphones
What is the future of prepaid unlimited?