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Competition Intensifies in the U.S. Wireless Prepaid Market

T S WMT AMX TMUS

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Competition is rising in the U.S. wireless prepaid market. The domestic prepaid mobile service businesses so far have been largely ignored by the telecom biggies. These national wireless carriers were mostly interested in the lucrative postpaid wireless market and the prepaid market remains a secondary option. However, over the last few years, the gap between prepaid and postpaid ARPU (average revenue per user) has narrowed significantly, forcing the wireless carriers to concentrate on the prepaid segment. Consequently, competition in this market has intensified.

Recently, TracFone confirmed that the company has acquired Walmart Family Mobile business from T-Mobile US Inc. (TMUS - Free Report) . Notably, TracFone is the prepaid subsidiary of the Mexican telecom behemoth America Movil SAB (AMX - Free Report) . The largest U.S. retailer Wat-Mart Stores Inc. (WMT - Free Report) launched its Walmart Family Mobile in 2010 as an MVNO (mobile virtual network operator) of T-Mobile US.

The reason for launching this service was to provide best quality handsets on a leading national wireless network for prepaid connections. Walmart operates roughly 4,600 stores in the U.S., and has become a major retailer of wireless phones and services. TracFone serves around 26 million prepaid subscribers in the U.S., Puerto Rico and U.S. Virgin Islands. On the other hand, the Walmart Family Mobile has around 1.4 million subscribers. TracFone is the largest MVNO in the U.S. offering nearly a dozen brands including Net10 Wireless, Straight Talk and SafeLink Wireless.

The reason for T-Mobile US to sell Walmart Family Mobile business is to establish its own MetroPCS prepaid mobile brand. Management has decided to open nearly 1,000 outlets for MetroPCS prepaid service this year. Meanwhile, U.S. telecom giant AT&T Inc. (T - Free Report) will also open 900 outlets for its Cricket prepaid wireless brand which it acquired after the takeover of Leap Wireless. Furthermore, Sprint Corp. (S - Free Report) has also decided to strengthen its Boost Mobile prepaid wireless brand.

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