How Resellers Are Driving the Market for Prepaid Wireless Service

Prepaid wireless service is surging in the U.S in large part because of the efforts of so-called mobile virtual network operators (MVNOs), which re-sell airtime from the major wireless networks, experts said at an industry conference yesterday. Indeed, the prepaid wireless market in the U.S., counting both airtime and carriers' share of digital content sales, should hit $22 billion by 2009, up from $7 billion last year, according to research firm Atlantic ACM, Boston. Speaking at the Pay As You Go Mobile Executive Summit in Dallas, Judy Reed Smith, chief executive of Atlantic ACM, said the market estimate for 2009 includes both traditional prepaid service as well as so-called hybrid service, in which consumers buy minutes in advance with a credit card rather than with cash. Both Reed Smith and other speakers at the conference pointed to how MVNOs, which can be anything from major consumer brands to street resellers, have breathed life into the prepaid wireless market since entering the business in 2002. According to Reed Smith, they already account for 49% of the market for prepaid wireless minutes, controlling some 5.5 million subscriber accounts in 2003. That account base, she says, will balloon to 32.8 million by 2009, while the carrier-direct base will shrink over the same time from 11.4 million to 8.5 million. Although not a new force in the business of re-selling post-paid wireless service, MVNOs have only recently gained a foothold in prepaid wireless as carriers, somewhat begrudgingly, sign them up to expand activity on their networks. Indeed, Sprint, the first carrier to use MVNOs to re-sell prepaid wireless service in the U.S., still accounts for the vast majority of MVNO activity, according to Reed Smith. Major-name MVNOs in the U.S. include 7-Eleven Inc., Boost Mobile, and Virgin Mobile U.S. The next big step for the MVNOs in prepaid wireless, speakers said, will likely be a move into data sales, including digital content such as ring tones, games, and music. Content, indeed, could turn out to be a bigger opportunity in prepaid wireless than voice, some speakers said.