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AT&T, Verizon, TracFone show uptick in prepaid

After a rough first quarter, it looks as though the prepaid sector is making a comeback, with recent second-quarter earnings showing an uptick for the sector.

AT&T added 135,000 prepaid customers in the second quarter of 2020, while Verizon added 12,000 prepaid customers. América Móvil, which owns TracFone Wireless, reported the biggest increase: 214,000 net adds for its prepaid services in the U.S. América Móvil has more than one brand in the U.S., with Straight Talk being one of the more well-known names.

Those figures are in contrast to what happened in the first quarter, when major brands reported prepaid losses. AT&T lost 45,000 prepaid customers in the first quarter and Verizon reported 84,000 prepaid net losses. T-Mobile recorded branded prepaid net customer losses of 128,000 in the first quarter; it also said that migrations to postpaid plans reduced prepaid net customer additions by about 115,000 in the first quarter. T-Mobile reports its second-quarter results on August 6.

Generally, one can expect a shift to more prepaid than postpaid accounts during a recession, but this year has not been like any other. COVID-19, T-Mobile/Sprint consolidation, Dish Network’s acquisition of Boost Mobile and permanent retail store closures are just a few of the dynamics going on.

According to Wave7 Research’s latest prepaid report, a prepaid veteran source in July commented that there could be a “mini-renaissance” for select prepaid carriers reminiscent of a positive surge for prepaid carriers amid the 2008 recession. Straight Talk is an early winner, having gained 361,000 subscribers during the first half of this year. “Factors for Straight Talk success have been third-party reps at Walmart, strong plans (e.g. 25GB for $45/month), and usage of Verizon’s high-quality network,” Wave7 stated.

Wave7 has seen an increase in direct-to-consumer advertising on TV for some brands, such as Visible, the digital brand owned by Verizon, according to Wave7 Research principal Jeff Moore.

In general, it was a busy quarter for the prepaid market. Dish closed its $1.4 billion acquisition of Boost on July 1 and entered the wireless retail market for the first time. It announced a new Boost Shrink-It! Plan, which starts at $45 for 15 GB and reduces monthly rates by $5 after three on-time payments.  

The new Boost offer sounds similar to one that Verizon announced in June, where it’s rewarding customers who stay, calling it “the longer you stay, the more you save” type of offer. That Verizon unlimited prepaid plan starts at $65 per month and can get as low as $50 after nine months with discounts. 

Given all the losses in the first quarter that were blamed on COVID-19, it was kind of surprising to see the increase at América Móvil, which for a number of quarters was reporting losses, according to Bill Ho, founder and principal analyst at 556 Ventures. Its Straight Talk brand is sold through Walmart, which remained open during the pandemic.

Both AT&T and T-Mobile were aggressive in their promotions for the iPhone SE in April, he noted. Metro by T-Mobile, for example, offered the second-generation iPhone SE for $99.99, with Metro covering the remaining $300 via instant and redemption rebates. Customers who switched needed to show an ID for verification and make six consecutive payments on any plan.

It’s still hard to know how many people are moving from postpaid to prepaid. “For the most part, I think there’s an element that people may be getting off postpaid and going to prepaid,” especially in the COVID-19 environment, Ho said. But it’s difficult because operators, like Verizon, don't reveal wholesale numbers.

Dish will probably get a pass, so to speak, he said, with Boost in the sense that the acquisition closed on July 1, so Boost’s second-quarter results technically would fall under the T-Mobile reporting structure.

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