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Technology Stocks : Boston Communications Group
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To: Crash who wrote (98)6/12/1998 11:45:00 AM
From: Mark Pearson  Read Replies (1) of 136
 
Crash,

What is up with this stock? BCGI operates in the largest mobile market in the world - 60m subscribers and has signed up a number of the largest operators for its prepay service bureau - AT&T, AirTouch, etc. Why has it so far managed to get only 300-400k subscribers?

This can probably be answered by looking at the US prepay market as a whole - Yankee Group reckons there were 0.5m mobile prepay at eo97 for the whole of NAmerica and forecast 1m for 98 and 2m for 00. Do you think these figures are too low?

Let's say there are 1m prepay subs in the US, what are the reasons for such low takeup rates compared with Europe where prepay mobile is often the fastest growing segment e.g. TIM in Italy claims over 4m prepay subscribers.

Some possible reasons:

Pricing: Price is key. Up until recently in the UK the price of prepay was far too high and hence the uptake was v.low. More competitors entered the fray - price came down and now the UK has over 500k prepay mobile users and growing rapidly. However, the price differential between contract and prepay in the US is similiar to that in Europe so it doesnt look like the pricing is too high.

Distribution: I know some of the operators have leveraged other distribution channels for prepay e.g. Airtouch with RadioShack but maybe this could be spread wider

Promotion: The US prepay schemes I have seen do appear to be fairly boring and are probably pushing the wrong buttons i.e. too much emphasis on "no credit check". The emphasis in Europe appears to be on freedom and control - "You are in control", "You call the shots".

Other possible reasons for low US uptake:

Operator concern about churn;
US market not culturally oriented towards prepay;
Difficult to implement on analog systems;

Maybe the PCS operators will push prepay - I read somewhere that Omnipoint is getting around half of its incremental subs from prepay.

Any comments?

Mark
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