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North American Prepaid Wireless Markets
Frost & Sullivan, Nov 2003
The Challenge Lies in Expanding the Market Profitably
The robust success of mobile virtual network operators (MVNOs) such as TracFone and Virgin Mobile - the former a prime example of a traditional MVNO and the latter an MVNO with roots outside of the telecom industry - is positively influencing interest in the North American prepaid wireless services markets. Participants are, however, realizing that it is one thing to show increasing numbers of subscribers and another thing to turn those subscribers into profit. Prepaid wireless players have to be able to wring bottom line profit from top-line revenues that are low due to the lesser average revenue per user (ARPU). A significant proportion of revenue can be eaten up by acquisition and customer support initiatives. Participants need to find novel ways to expand into the market profitably.
This research service analyzes the North American markets for prepaid wireless services. The study segments the market between the two prevalent business models-mobile network operators (MNOs) and MVNOs-and presents analyses of market drivers, restraints, and forecasts, and identifies areas of growth.
Prepaid Wireless Services Represent a Growth Opportunity for Carriers
For years, carriers have been concentrating their efforts on the postpaid wireless services market because of the relatively high ARPU and the fact that customers are locked in through contracts. With the increasing saturation in the postpaid wireless services market, prepaid wireless services are presenting carriers with a way to grow and diversify their revenue.
Some carriers are looking at prepaid wireless services as a means to introduce their customers to postpaid offerings - once customers become familiar with the service or run up a large bill, they may opt for the carrier's postpaid offering. Prepaid service is also a way for companies to complement their current postpaid wireless service revenue. With such an environment, prepaid wireless services now stand on the cusp of greater acceptance by both carriers and consumers, says the author. Companies such as Nextel Communications are proving this by increasing their number of prepaid subscribers.
Carriers' Efforts to Enhance Attractiveness of Prepaid Services Can Help Market Grow
With the prepaid wireless market only a fraction of its expected size, companies that are willing to commit their resources to it during the initial stages, can expect to capture a formidable market share, notes the author. Carriers are already putting in effort to make their product/service offerings stand out. New feature sets for prepaid service offerings include phones that are much more fashionable and low-priced.
Some carriers are also focusing on developing compelling wireless products that offer customers a wide array of services such as additional airtime, calling features, and data products. Besides increasing the attractiveness and value of their offerings, this can help carriers offset the higher price-per-minute of prepaid wireless services and increase usage, revenue, and retention of customers.
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