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Competition Intensifies in the U.S. Wireless Prepaid Market

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Competition is intensifying in the U.S. wireless prepaid market. The gap between prepaid and postpaid average revenue per user (ARPU) has narrowed significantly, forcing telecom biggies to turn their attention to the domestic prepaid mobile service business.

This was not the case even a few years back when the prepaid segment was largely ignored by wireless carriers interested in the lucrative postpaid wireless market. However, this new development has forced these wireless operators to concentrate on the prepaid segment, consequently escalating, competition in this market has intensified.

Unlimited Data Plan War

Stiff pricing competition in the industry is a genuine concern. Recently, we witnessed the four major wireless telecommunications companies participating in the unlimited postpaid data plan war in order to stand out in the landscape. These wireless operators are now extending their unlimited data plan to the prepaid market as well.

U.S. telecom behemoth AT&T Inc.’s (T - Free Report) Cricket prepaid wireless brand, which it acquired after the takeover of Leap Wireless, recently cut the price of its existing unlimited plan from $70 to $60 a month. T-Mobile US Inc.’s (TMUS - Free Report) MetroPCS prepaid mobile brand has expanded its monthly 8 GB plan to include unlimited data.

Similarly, Sprint Corp. (S - Free Report) has decided to strengthen its Boost Mobile prepaid wireless brand by offering four lines of compressed unlimited data for $100 a month to users who switch carriers. Sprint’s Virgin prepaid brand also followed suit with a new $60-a-month unlimited plan.

Furthermore, United States Cellular Corp. (USM - Free Report) has introduced unlimited high-speed data on its Simple Connect and Ready Connect Prepaid offerings, for $70 per month. In addition, the company has streamlined the plans and added more data to its $35 and $45 plans, which now come with 1GB and 5GB data, respectively. United States Cellular currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

Rapid technological invention and innovation have resulted in significant competition within the telecommunications industry. Product life-cycle and upgrade-cycle have gone down drastically with several firms coming up with new versions of products and services within a short span of time. To combat competition, the players are thus increasingly looking at new avenues. Extending unlimited data plan to the prepaid market is one such avenue.

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