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(originally published by Booz & Company)


Will Prepaid Service Be the Next Wireless Frontier?

5. Turn prepaid customers into postpaid subscribers. The prepaid strategy needs to be seen as one among a carrier’s mix of offerings, and not a completely different service, as it is mostly viewed today. If a carrier provides value-added features, varied pricing plans, and even flexible payment strategies, such as paying via the Internet, many prepaid customers could gradually be enticed to increase their cell phone usage, and become more familiar with all the carrier’s services. Eventually, that could transform more and more prepaid customers into postpaid subscribers.

“It’s essential that carriers squeeze all the value they can from prepaid offerings by controlling costs and creating revenue with better services.”
A Focused Strategy
The most significant aspect of this fresh view of the wireless market is that it reveals a strong two-pronged approach to overcoming slowing growth. First, a prepaid customer acquisition strategy for wireless carriers can target previously neglected consumer segments to drive increases in market share. Second, by focusing on reducing the costs associated with the prepaid service, wireless carriers can rapidly improve financial performance associated with this offering.

Importantly, though, financial improvements cannot be guaranteed just by increasing the prepaid customer base because other variables — infrastructure costs, overhead, and organizational efficiency, to name a few — affect carrier performance. However, if a carrier pursues a focused strategy based on the multiple levers of value maximization, tight cost management, and a consistent approach to convert the prepaid customers into a postpaid subscriber, the economics of the prepaid customer can be extremely attractive.

Raul L. Katz, [email protected]
Raul L. Katz is a vice president with Booz Allen Hamilton's New York office. He had 18 years of experience specializing in business strategy, consumer and industrial marketing, and the management of international telecommunications companies.

Eric J. Riddleberger, [email protected]
Eric J. Riddleberger, a Booz Allen Hamilton vice president based in McLean, Va., has 19 years experience in telecommunications strategy and technology, including market analysis, strategic planning, and business development.

Bharat V. Sarma, [email protected]
Bharat V. Sarma  is a senior associate with Booz Allen Hamilton in New York. He specializes in developing and implementing strategies for wireless telecommunications carriers, equipment manufacturers, and technology companies. He focuses on market assessment, business strategy, financial reengineering, and sales reorganization.

Daniel H. Yang, [email protected]
Daniel H. Yang is an associate with Booz Allen Hamilton in New York. He specializes in developing and implementing strategies for wireless and wireline telecommunications carriers.
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