It’s been a little over a month since DISH Network acquired Boost Mobile from the T-Mobile/Sprint merger for $1.4 billion and with that, over 9 million prepaid customers. Within the past few weeks, DISH has learned some new things about the prepaid business and have plans to change things up.
During DISH’s second-quarter earnings call on Friday, DISH Chairman Charlie Ergen said, “There are some of those customers that perhaps the way Sprint accounted for them … The way they ran that business wouldn’t make sense for us. We certainly have some cleaning up to do there.”
Boost Mobile recently launched five new limited plans dubbed “5 under $50.” Boost also launched two new unlimited plans for under $50 and $60 a month.
Ergen noted that the postpaid market is more profitable, especially as an MVNO but that the prepaid business is sort of backwards in comparison to the rest of the world. Ergen said, “The United States is really the only country that I know of where the prepaid business actually is less expensive than the postpaid business.”
The statement came from things Ergen saw in video or OTT-business where the driving idea was to sell below cost and earn money back in volume. In the prepaid market in the US today, customers with good credit have to finance their phones yet customers with no credit can get a free or “nearly free” phone.
DISH brought back the popular $hrink-It! Plan that starts at $45/month for 15 GB of data and unlimited talk and text. The benefit of the $hrink-It! Plan is it reduces the customers’ monthly rates by $5 for three non-consecutive on-time payments, with an additional $5 after six on-time payments. Other new plans include 1 GB of high-speed data for $10, 2 GB of high-speed data for $15, 5 GB of high-speed data for $25, and 10 GB of high-speed data for $35.
The MVNO deal struck up between DISH and T-Mobile likely requires DISH to pay T-Mobile by the GB of usage, so DISH has an incentive to limit data for Boost Mobile customers. Jeff Moore, principal of Wave7 Research said that the deal is a good one for DISH.
Moore observed that the low data points may not seem like much data to the average user, it does appeal to a certain demographic, including older subscribers. The $20 price point is popular among prepaid carriers and though Boost has not traditionally gone after the older demographic, Moore said, “If they don’t market to older Americans, then I think they’re missing an opportunity.” This is mainly because older folks don’t need a lot of data. In addition, this price point may be appealing for those who work from home all day, therefore not needing as much data.
Moore said that there’s a segment of the US prepaid market where the phones are subsidized and segments where it’s not. Moore noted these as an urban prepaid competition where phones are subsidized and retail prepaid on a national scale where phones are not subsidized. Now that Boost Mobile is owned by DISH, it’s getting a clearer idea of how it competes in the prepaid market.
Wave7 has seen some trends recently where service providers are trying to stop customers who frequently switch from one carrier to another to get free phones, often called “round-trippers.”
Tom Cullen, DISH Executive VP of Corporate Development said that DISH doesn’t view the wireless business as just prepaid and postpaid and that there’s a massive wholesale opportunity for them. And given DISH’s spectrum holdings, there’s room to dominate that side of the business.
During the earnings call, Cullen said, “We’re going to have so much more capacity than we need for pre- and postpaid.” He noted that there’s a ton of support from Washington D.C. for open radio access network (RAN) and for a US-based telco vendor ecosystem. He said that the progress DISH has seen around network slicing, automation, and the ability to sell wholesale capacity has been huge.
Source: Fierce Wireless