3/5/2009 1:13:00 PM
Sim-only is killing prepay
A common theme emerged in the operators who published their numbers this week: prepay is the biggest casualty of the economic downturn. There were some who wrongly predicted a shift to prepay with the rationale that it would be the cheaper option for customers wanting to reduce their outgoings.
There are several factors at work here. Firstly, prepay customers are arguably under the most immediate pressure to cut their outgoings, and by nature of being on prepay, typically look at mobile as more of a luxury than a contract customer. A prepay purchase involves money being handed over, rather than a ‘free’ upgrade.
Operators also appear to be using the current conditions for a long overdue tougher line on box breaking, taking fewer risks with subsidised deals they put into pay-as-you-go.
Another factor is the disappearance of Woolworths – a supposed two million handset sales per year player. Its collapse has not appeared to lead to a mass re-routing of customers going elsewhere for their phones.
But it is the emergence of the manufacturers’ big nemesis, Sim-only, that is the biggest reason for prepay sales drying up. Sim-only offers no long-term tie-in, exceptional value and those attributes are being marketing with aplomb by the operators.
Sim-only is becoming the emblem of the current period of the mobile industry. The manufacturers argue that it is a backward step for operators to promote something that does little more than commoditise voice and minutes and push prices down. That said, prepay’s demise is
likely to be temporary, and is likely to be back as the economy changes.