Segmentation Moves in the Mobile Market Spreading Out and Packing More Punch

Sharon Armbrust | October 25, 2006, 06:25 PM

Leap and Metro’s big wins in the AWS auction will bring their brand of all-you-can-eat prepaid service into a ton of new markets. Leap has already reported adding a robust 161K net new subscribers in 3Q06, up from 3K adds a year ago, thanks to 10 new 2006 market launches including Austin, El Paso, Colorado sprints, Houston, San Antonio, Cincinnati and Kansas City. Through the first nine months of this year, Leap’s net adds were up 180% over the full 12 months of 2005.

As Leap moves into major new territories like Philadelphia, Washington, DC and Minneapolis and Metro takes its attack to the greater New York metropolitan area as well as expands its reach in Northern CA and around Dallas, they will be putting real pressure on the national competitors from the bottom up--in many, many more markets than before, in particular in coveted top 50 metros.

Cingular is now touting the efficiency of its prepaid GoPhone platform as it tries to get some more share in low end market sectors and claims to have a handle on the cost structures. It tripled its net prepaid adds in 3Q06 y-o-y and indicated that 85% of prepaid subs migrating off the company’s old platform were buying into plans of on average 25% higher value than before. However, historically the big 4’s high cost networks have simply been no match for the custom-built low cost networks of the segmentation specialists like Leap and Metro. And Cingular admits that this is a lower margin business for it.

First to market in another juicy market segment, T-Mobile launched its single-phone convergence service trial in Seattle 10/23 with two Samsung dual-mode GSM-Wi-Fi models for $49.99 with a 2-year service contract and the purchase of least a $39.99/mo. plan. A $19.99 flat monthly fee gets added for unlimited access to customer’s own home broadband connection (sub buys a router) and to T-Mobile’s 7K location Wi-Fi network where sub’s usage doesn’t deplete subscriber’s mobile plan MOUs.

Here again, the hybrid structure of T-Mobile’s networks and its business model give it a big leg up on capturing this market segment early on. T-Mobile has no landline parent like Verizon and Cingular, so it can go full speed ahead in trying to migrate subs to a single phone hybrid net solution, where its wireline competitors have to orchestrate this evolution much more delicately and deliberately.
And whatever MOUs T-Mo loses on its PCS network reduce the burden on its infrastructure (T-Mobile subs chow down more than 1K MOUs/mo. on average. In addition, if customers are making their calls from home, they are most often doing it during free evening and weekend dayparts, where T-Mobile isn’t making money anyway.