Operator must embrace prepaid

Raymond Yu and Nathan Burley, Senior Analysts, Ovum

MELBOURNE, AUSTRALIA: Across many developed markets, we have witnessed a shift in customer demands toward tariffs with “prepaid-like” qualities. Operators should take prepaid customers more seriously and offer them the same services as post-paid customers. In addition, operators should stop worrying about diluting ARPU and instead focus on the bottom line.

Customers are demanding prepaid-like qualities
During the past few years we have witnessed increased demand in some developed Asia-Pacific markets for prepaid-like qualities. Customers want greater control over their mobile expenditure and the freedom of not being tied to a contract. This has resulted in a range of hybrid tariffs that possess both post-paid and prepaid traits.

The emergence and growth in SIM-only tariffs gives post-paid customers the ability to change or limit their monthly expenditure and monthly contract terms.

This shift from post-paid toward prepaid has also been fuelled by long contracts for the latest handsets in many develop Asia-Pacific countries and poorer economic conditions.

Operators need to take prepaid more seriously
As developed mobile markets mature, operators’ priorities have moved away from connections growth and toward retention. Under these conditions, prepaid customers are just as important as post-paid. However, operators still have work to do on the prepaid side.

Prepaid customers are increasingly demanding access to the same range of features and services available to post-paid customers. We support their demands because it does not make sense that prepaid customers are punished.

Prepaid is still a good opportunity for operators in developed markets
Operators in developed markets need to view prepaid as a growth opportunity. As shown by our recent report “Mobile operators in mature markets must learn from emerging markets”, operators in developed countries have much to learn from prepaid-dominated emerging markets such as India where operators are profitable even with very low ARPUs.

Operators might even learn to take a more relaxed approach to multiple SIM ownership, which is already very attractive to many customers in developed markets. Operators are reluctant to encourage this because they believe it will negatively impact ARPU by which financial and other analysts judge them.

We believe it is high time for the industry to take a more aggressive view and begin to educate stakeholders that the bottom line is the metric that really matters.