A take on Sprint deal: The Future of Prepaid Rests in Intelligent Services

Entities Mentioned

• Sprint Nextel
• Technology
• Virgin Mobile USA

1. 

   With today’s announcement that Sprint Nextel has agreed to acquire Virgin Mobile USA, once again we are reminded that the prepaid market is a much more important market than many people realize. Worldwide, at the end of 2008 prepaid subscribers represented 72% of all subscribers (GSMA Wireless Intelligence). The prepaid market is a challenging one, however. In general, prepaid subscribers have less disposable income leading to much lower ARPU. In addition, given the lack of a contract, churn for prepaid subscribers is much higher (easily 3-5 times higher). While cost control is a critical component for prepaid success, given the huge financial impact of churn on a prepaid operator or business unit, the ability to rapidly deploy innovative services that keep fickle prepaid customers from leaving generates enormous financial dividends to a prepaid operator or business unit. 

   However, rapidly deploying innovative services is easier said than done. But there is an option for operators. For example service delivery and innovation technology such as our Open Services Framework provides the technical platform for operators to do rapid service creation and introduction of sticky services like mobile advertising, social networking, security or mobile money transfers. And just as importantly, these services can be enhanced with operator capabilities.

   It’s great to see that carriers like Sprint see this too and are pursuing a similar strategy (in this case, Sprint’s OpenAPI).  The benefits are clear. The Virgin Mobile USA acquisition brings not only prepaid customers and distribution channels, but also a marketing team that has deployed many innovative end-user services designed to attract and keep customers. This combination of open platforms and a marketing plan that envisions and incorporates attractive services will not only support Sprint's prepaid initiatives but also benefit its contract business.

   Bottom line - the future of prepaid is bright with smart platform and service strategies to go the distance with subscribers.

    

   
   

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