T-Mobile is growing their prepaid business. Unfortunately for them, it appears to be coming at the cost of their more profitable postpaid service. This week we learned what T-Mo did in the first quarter, and like the past two it added more prepaid customers than postpaid. This time, though, the proportion was even larger. While they added 57 percent prepaid in the fourth quarter of 2008, they increased that to 60 percent in the first quarter of 2009. The bummer is that they added only 415,000 total subscribers, so the hard number of additions didn’t quite match Q4. So is T-Mobile really moving into the prepaid business? Perhaps a better way to put this is, are they going to embrace prepaid, or are they going to fight it in favor of the more profitable postpaid sector? Craig Moffett, senior analyst at Bernstein Research, thinks they should do the former.
“We believe T-Mobile will have no choice but to match the new $50 level going forward – being priced twice as high as the market is not a viable strategy,” Moffett said in a research note. “And when that happens, the competitive dynamic of the unlimited pre-paid segment will be exactly where it was a few quarters ago … but with a lower price point. Whatever momentum Sprint has gained as a result of its Boost Unlimited offering will become much more challenging to maintain beyond that point.”The $50 price point appears the place to be. Both MetroPCS and Cricket wireless offer their best plans at this rate. We know Boost Unlimited has set a new bar here, offering $50 unlimited on a nationwide basis. Even Virgin Mobile has reduced their unlimited voice plan to $50. If T-Mobile wants to capitalize on their newfound prepaid success, they’d be wise to do the same.]]>