Credit-challenged segment of prepaid declines, other segments grow rapidly

Mobile Phone News, May 12, 1997 by Aaryn Slafky, Mike Maynard

While 56 percent of the population using NTC's SmartPay platform are credit-challenged, this segment gradually is losing its majority share of the prepaid offering, Boivin said. In a previous survey conducted by NTC, 59 percent were from that segment.

At a recent "Prepaid Wireless" seminar, Boivin shared some statistics NTC has collected on consumers using its SmartPay prepaid cellular platform as well as general data on U.S. consumers. For example, Boivin estimated that 90 million Americans pay cash. Since more than 80 percent of the population prefers cash, it is imperative to make cash replenishment easy, he emphasized.

Boivin also said that 31 percent of the U.S. population have no checking accounts and 20 million have been refused cellular service across multiple population segments.

...Majority of Prepaid Subs Have Phones Already

At least 80 percent of those signing up for prepaid already have phones - a large portion are disconnects, people whose service was shut off due to a failure to pay. Boivin suggested that carriers serving people nearing disconnect status can keep those customers by offering them the prepayment option. As they prepay for service, a portion of that money could be used to pay off the prior debt.

Based on data collected from uniform surveys sent regularly by NTC to every subscriber with a SmartPay account, these statistics were found:

* The average monthly revenue per subscriber (ARPU) is $53.59, which is going up - in a previous survey the ARPU was $52.82

* The average airtime rate is 69 cents per minute

* 24 percent have no credit, which is going up as carriers target universities and colleges

* 20 percent of the SmartPay users have credit; they prefer prepayment even though they could qualify for traditional postpay service

* The average deposit made by SmartPay users is $30.87, about twice a month. That amount is increasing, perhaps as they get attached to the convenience of wireless.

* 39.8 calls are completed per month per account

* The average duration of a call is 1.85 minutes

* Less than 6 percent of calls are long-distance calls

* 20 percent of calls are inbound

Boivin believes that minutes of usage are declining among postpay users because every time they hit the send button, they think, "I'm spending money." However, with prepay customers, they already have spent the money, so they think "why not use it?"

NTC is establishing revenue-sharing arrangements with carriers whereby it installs the SmartPay hardware and the carriers manage the .SmartPay platform. One of its largest customers is AT&T Wireless Services Inc. [T], which recently introduced its "FlexCall" prepaid cellular service in Texas (MPN, April 28).

Boivin strongly recommends that carriers supplement their traditional cellular sales outlets with other establishments like gas stations, convenience stores, check cashing outlets, shopping malls, grocery stores and retail stores in order to make replenishment as easy as filling up a gas tank.

However, unless the process is made as easy as swiping a credit card, carriers will open themselves up to greater potential for error by store clerks. The SmartPay system issues an identification card with a magnetic strip to all subscribers. A store clerk simply swipes the card in a machine resembling a credit card processor and enters the dollar deposit amount given.