Prepaid outstrips postpaid two to one

During 2007 and into 2008, the market for prepaid mobile services has continued to grow more than twice as fast as the contract market according to Informa Telecoms & Media. At the end of 2007, there were 2.33 billion prepaid subscriptions in the world, of which nearly two per cent were accounted for by prepaid WCDMA accesses.

Prepaid services generated $241.9bn in revenues for mobile network operators in 2007. By far the largest prepaid market was Asia Pacific, with 43 per cent of global subscriptions and almost 30 per cent of revenues.

The number of people owning multiple SIMs continues to rise, and at the end of 2008 about 28.9 per cent of reported subscriptions worldwide will be accounted for by secondary or tertiary SIM card ownership. Operators may be forced to consider whether issuing SIM cards is a sustainable way of increasing the lifetime value and profitability of individual customers.

Ultimately, understanding prepaid customers’ individual value expectations rather than how many SIM cards are in circulation may be a more reliable route to long-term improvements in ARPU and profitability.

Informa Telecoms & Media predicts that by 2013 there will be 3.93 billion prepaid subscriptions, generating revenues of $382.2bn. Although prepaid subscription growth will slow down to a global CAGR of just over nine per cent from 2007-2013, the prepaid market will still account for over 80 per cent of new mobile subscriptions over the period and will continue to outperform contract growth.

Future growth will come from new customers, primarily very-low-income customers in developing markets; existing prepaid customers, prepared to increase their spending on value-added services; and contract customers, using prepaid bolt-ons for services such as ‘mobile broadband’ applications and receptive to hybrid tariff plans as a means of increasing their control over their spending on mobile services.

In developed markets, operators will increasingly seek to maximise the value of their prepaid customer base. The dividing-line between contract and prepaid is blurring, as contracts become shorter, SIM-only deals proliferate, and prepayment mechanisms for contract add-ons become the norm. To maximise the value of prepay, operators need to become much better at enabling customers to tailor their services to their needs.

In developing regions, there is extensive innovation in terms of designing tailored packages for prepaid customers and as a result prepaid customers are often able to access more advanced services than in developed markets. However, operators need to balance the need to acquire share of very low-spending customers to increase their prepaid base, versus the need to develop increased value from existing prepaid customers in the long-term. Differentiation will shift from price to value, and the role of new services that maximise the potential of the mobile handset will be key to growth.

New prepaid mobile applications are a potential diversification route available to all operators, and one that is particularly attractive to operators in emerging markets. By diversifying their revenue streams into related mobile-based applications and maximizing the use of their mobile customer base and billing/recharge relationship, operators can potentially increase the usage of their networks and improve their return on investment, even in a very-low-ARPU context.