Has prepaid peaked for the time being?

Boost Mobile introduced its $50 unlimited plan. MetroPCS expanded to Boston and New York. Combined they added about 1.4 million subscribers. While it was easy to attribute those gains to the aforementioned upgrades, Cricket did pretty well, too, adding nearly a half million subscribers after rolling out service in Chicago and Philadelphia. It appeared that prepaid was on the uptick. Yet, as the year went along, we saw those subscriber gains dwindle, culminating in poor third quarters for many operators. Things rebounded somewhat for the fourth, but it still has some asking the question of whether the rise in prepaid was just a half-year trend. GigOM points to a research note from Pali Research, which puts into question the ability of prepaid wireless services to continue growing at a rapid rate. Or, in other words, will they see gains only when other prepaid carriers see losses? This is, by the way, the same research company we cited the other day when they predicted that Boost’s CDMA plan wouldn’t help the company very much.

The question remains whether Boost grew the pre-paid market or merely took existing market share that is in the process of purging out of Metro and Leap. We believe it’s the latter and while new pricing and competitors could sustain industry pre-paid gross additions in the near term, we believe the underlying trend is in decline.

Of course, if we see a double dip recession in 2010, that outlook could change. But for now I see the point. Contract carriers are keeping customers interested with their high-end phones, so the prepaid carriers might trade people back and forth for a bit, until a new wave of customers sees the value in their services. Which brings along a period of rapid growth, which in turn leads to a period of stagnation. The question, really, is of how frequently this cycle will repeat.]]>