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Verizon transforms US Prepaid Markets with TracFone purchase

by David Kerr | Sep 15, 2020

Verizon Wireless finally addressed one of its biggest weaknesses with the proposed acquisition of TracFone for $6.25B.

For many years, Verizon Wireless had largely ignored the value segment of the US market leaving the prepaid battle largely to AT&T, T-Mobile and Sprint although Verizon does carry 13M of Tracfone's 23m customers on its network. 

At the end of Q2, 2020, Verizon reported just under 4M prepaid customers compared to 18m for AT&T and 20.5m for T-Mobile according our latest report Wireless Operator Performance Benchmarking Q2 2020 which can be accessed by clients to our Service Provider Strategies service here.   With the acquisition Verizon will leapfrog to the top of the US prepaid market reversing a decline in its prepaid users since a peak in Q3 2017. 

The prepaid market in the US has had a mini renaissance in 2020 as concerned and more frugal buyers sought out better value from their mobile services in light of the Covid-19 virus and dire economic impact with lockdowns and unemployment levels not seen for decades. 

So who are these Value seeking mobile consumers? What do they look like in terms of age, income, education, spend levels, attitudes to technology? Strategy Analytics profiled US Value Brand buyers of mobile service in our March report here

We defined value as brands as including

Tracfone brands: Straight Talk, TracFone, Net10 Wireless, Simple Mobile,Walmart Family Mobile
Cricket Wireless (AT&T value brand)
MetroPCS (T-Mobile value brand)
Boost Mobile, Virgin Mobile (Sprint value brands)

USValuebrandsincom

  • More than half of Value Brand subscribers reported spending less than $50 per month on their wireless service.
  • Compared to Top Tier Brands, Value Brands have a larger percent of their subscribers that are Homemakers, Retired, or Unemployed.

  • Value Brands have a higher percentage of African American/Black and fewer Caucasian/White and Asian/Pacific Islander subscribers.

  • Within the Value Brands, Boost Mobile skews to more single person households compared to Straight Talk.
  • Tracfone has more households with no children compared to MetroPCS and Walmart Family Mobile, which cater to family plans.
  • Value Brand subscribers indicated they are more likely to replace their smartphone sooner, with over a third replacing before 2 years compared to just under a quarter of Top Tier Brand subscribers
  • Value Brand service provider user are interested in 5G but only 20% are willing to pay to get it.
Client to the Service Provider Strategies can access the full report here.  In a saturated, mature, technologically advanced market like the US most growth will come from the value segment. Competition will intensify with cable MVNOs in addition to Dish as new owner of Boost and others target the few remaining new customers.  The battle for marketshare will benefit users with long needed innovation likely to come to the space in the coming months.
 

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