Andrew,
Thanks for your reply. Just keep in mind that the worlds of prepaid calling cards and prepaid wireless are two different animals. In order to understand the differences, you need to focus on the target market of each. In the prepaid card world, the users are driven by lower long distance rates afforded through the use of the card. While the long distance rates from your home or business are much lower, the card was intended to give you relief from high long distance rates while in locations where these home/business rates are not accessible by users. Hotels, Foreign Countries, University, Military, and Mobile Professionals are a few examples of the niche markets targeted by the carriers.
In the prepaid wireless market, this service is targeted towards those users that cannot obtain regular cellular service. The majority of these users are people who fail the credit check that is performed in the store on every single prospective customer. The retailers do this because they are spending between $250 to $500 upfront(cost of handset, cost of marketing/sales) on every customer that obtains service. This is the reason they ask for your driver's license and request you fill out an application so that the credit check may be run while you are in the store. In order for the carrier to make a profit, they will require you remain a loyal customer within a certain timeframe depending on their upfront cost. I am a wireless consultant and I can tell you that approximately one third of the customers that apply for service are rejected due to the credit report. I think some simple math will tell you how much a retailer can lose when 33% of it's prospective customers walk out the door with out making a purchase. In some Latin and South American countries the rates are higher than 50%. The need for this service is much greater than on the prepaid card side due to the high amounts of revenue to the carrier involved(tens of millions on an annual basis). I believe that we are just starting to see the tip of the iceberg on the revenue that this service can provide. The reason that it has not been promoted heavily, is that the analysts associate prepaid wireless with prepaid cards which provide a lower revenue projection. Just my opinion but I think that 1997-1998 will see explosive growth in the prepaid wireless market translating into landslide revenue for the successful players. To date, I see BCGI as the strongest player out there with a large lead-time to market. If you're not in today, I think anyone should give it serious consideration and expect to hold the shares a minmum of six months to one year.
Later,
Crash |
