Mark,
I belive you hit on some of the key points that are keeping the prepaid subscribers numbers lower than they should be at this point. BCG's subscriber growth is reliant on the distribution and marketing schemes of the member carriers. They are attempting to address this issue by forming alliances with companies that have distribution channels in place today. This issue explains the recent alliance announcement with SmartTalk and the past releases with RadioShack and others.
I agree that the US carrier community has focused this product on the credit-challenged when it should be positioned as another product in their portfolio. I have heard from several major carriers that this will change in the coming months leading up to the holiday season. As for your comparisons between the US and European prepaid markets, I agree that the rate structures are not substantially different. The only point I would make here is that the service should be somewhat cheaper than it is today due to the fact that it is more economical to provide than your typical wireless service. The acquisition costs are typically lower as well as the much lower costs from a back-office and billing perspective. This translates into much higher operating margins for the carriers who drive this service aggressively into the market.
One additional point that should be taken into account when comparing the US and European wireless prepaid market is the issue of Calling Party Pays. Since the inception of wireless service in Europe, the policy of charging inbound callers for wireless service charges has resulted in both increased monthly Minutes-Of-Use and the ability for subscribers to freely give out their wireless phone numbers for contact purposes. I participated in a trial of Calling Party Pays two years ago in Hawaii and California which demonstrated not only the increased inbound calling traffic but also that outbound traffic increases at a phenomenal rate attributable to the increased user contact of the inbound calls. Unfortunately, in the US, the back office operations and government regulations do not support this type of offering today. The CTIA has petitioned the FCC to create a policy that would support the use of this service. I spoke at one of the CTIA panel discussions that developed this petition but I am not confident that it will be addressed by the FCC in a timely manner. This is mainly due to the other pressing issues facing the FCC today, such as Zoning/Siting, CPNI, IP Telephony Regulation, and 1996 TeleComm Reform Act Clarification. Hopefully this will be addressed once some of the larger issues are resolved.
It would be wise to remember that the US prepaid market is in it's infancy compared to the European markets. Once some of the painful lessons are learned by the US carrier community, this service will experience exponential leaps in subscriber growth. It comes down to a decision on if you are investing for the long or short haul at this juncture. BCG is uniquely positioned by being first-to-market and if their performance can meet carrier expectations for reliability and growth, they will be wildly successful when this ramp-up occurs. I personally have accumulated additional shares when BCGI stock dips into the pricing ranges as we see today. This provides me with two key benefits, the first being the opportunity to obtain an undervalued stock at fire-sale prices and the second is that it makes BCGI an attractive acquisition target for other prepaid players that have been unsuccessful in tapping this market. (Are You Guys Listening Out There?). This fact is probably the reasoning behind the BCGI buyout rumors that I am finding on various message boards and chat areas on the net. Time will tell IMHO.
As for the PCS operators, your are exactly correct. They have realized the potential of this market and are much more aggressive in promoting their prepaid products to the market. But don't make the mistake of believing that this was intended from the start of their service operations. After the first six months of operation, the major PCS players discovered that over 80% of their subscriber base consisted of prepaid users. There were two reasons that this event occurred. The first is the lack of roaming business agreements between the various PCS carriers when they launched service which kept away the highly profitable mobile power users. The second reason was confirmed when I visited multiple non-company distribution outlets, such as RadioShack, and witnessed how subscribers that failed credit checks of other carriers, were goaded into accepting the PCS carriers prepaid product as it was the only prepaid offering of the various carriers represented in the stores. It just goes to prove that you don't necessarily have to have the best product, but just the right product for a particular need.
Regards,
Crash |
