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Smaller carriers, MVNOs, taking prepaid business from big carriers

This was bound to happen sometime. A recent report shows that small prepaid carriers did quite well in the third quarter, increasing their subscriber totals by 23 percent. Where did those customers come from? While there are many sources, a large portion might have come from large carriers’ prepaid programs. Those numbers slipped 12 percent — and that’s including T-Mobile’s 365,000 prepaid adds, the great majority of which were with the main brand. The swing was great, indeed. Now that prepaid has become something of a mainstream option, consumers are starting to see the benefits of contract-free cellular.

Another positive prepaid trend: 70 percent of people who bought prepaid smartphones in the third quarter had switched from one of the Big Four carriers — whether postpaid or prepaid. That is, people are seeing the values in buying a handset outright and paying less for service. With decent prepaid handsets in the $150 to $200 range, customers are seeing fewer and fewer reasons to sign that two-year contract and pay those high monthly rates.

Even better: Of all smartphones sold in the quarter, 42 percent were prepaid. All numbers in this report represent significant increases from previous quarters. We could see trends continue in direction. It will be interesting to see how the big carriers respond to this trend that threatens their tidily profitable business model.