New prepaid unlimited plans causing market volatility posted by Joe on July 8th, 2009 - 10:00 am | Tracfone
It appears that the new spat of prepaid unlimited plans, particularly that of Straight Talk, has caused a bit of a swirl in the markets this week. While stock prices of prepaid companies isn’t typically our domain, this one has to do with service. Earlier in the week shareholders largely dumped shares of MetroPCS and Leap Wireless amid concerns over a pricing war, sparked by Straight Talk’s cheaper unlimited plan. Of course, both Metro and Cricket offer $45 plans which are comparable to Straight Talk. So what gives? It appears the fears were just a bit overblown. It did lead, though, to a few frank comments about the prepaid industry.
John Hodulik of UBS noted that only 12 million of 50 million total U.S. prepaid subscribers are on an unlimited plan. “As unlimited prepaid service becomes more widely available, we expect many traditional prepaid customers will switch, since the economics of traditional prepaid are inferior to those of unlimited prepaid,” he said. That could mean growth all around. It also helps explain why we’ve seen so many carriers debut unlimited plans in recent months.
Chandan Sarkar of Auriga USA noted that the fears were overblown because Straight Talk went with a $45 price point for their unlimited plan, rather than $30 — a plan which still provides 1,000 minutes and 1,000 texts per month. “While some view the new plan as adding more pricing pressure to the U.S. wireless market, we view it as less severe than the worst-case scenario that would have unfolded if the $30 plan had been adopted widely,” he said.
Matters, it appears, have returned to normal…for now. Soon enough someone’s going to come in and change the landscape, whether that’s through price or service. However, that won’t be something to panic over — that is, unless you’re an investor in one of the companies that doesn’t keep up.