T-Mobile gains Straight Talk to face prepaid slide
3G and contract customers on the rise in Q2 but total use base falls
Published: 9 August, 2010
READ MORE: Financial | US | T-Mobile USA | MVNO
The prepaid market has been a major growth area in the US during the downturn, and one of the most aggressive players is America Movil's Straight Talk MVNO. This has run on Verizon's CDMA network but is now going cross-network in order to expand availability to GSM phones in all frequencies. Hard on the heels of a deal with AT&T, which will power Straight Talk phones offered by retail giant Wal-Mart, it is likely to sign with T-Mobile USA too.
TMo will be looking for increased wholesale business as its own customer defections mount, and even at the risk of cannibalizing its own, increasingly important prepaid offerings. The deal was reported in a research note from BTIG analyst Walter Piecyk, which said the prepaid, unlimited market was consolidating rapidly. Sprint Nextel, as well as seeking broad reach by creating four targeted prepaid brands, recently signed a 3G data roaming deal with prepaid specialist Leap Wireless and is trying to reduce its dependence on its ageing iDEN network, which powers the Boost service. MetroPCS, meanwhile, aims to gain competitive edge by moving quickly to LTE.
"This is what happens in competitive markets with high fixed costs that are approaching maturity," Piecyk said in the note. "Voice revenue is in decline and operators will continue to look for more ways to utilize the capacity on their networks. We expect voice pricing to continue to get incrementally competitive in the second half of the year, but it's more likely to happen on the postpaid side of the business given the disparity with unlimited prepaid pricing."
He expects Straight Talk GSM phones to come with SIM cards that work on either TMo or AT&T networks.
Meanwhile, T-Mobile USA suffered another quarter of customer losses, with its total base falling by 93,000 in Q2, steeper than its net losses of 77,000 in the first quarter of this year. As in that period, it claims its user base is shifting towards 3G and higher margin data services, with 25% of its total ARPU now coming from data.
In a different pattern to Sprint's, the defections are concentrated in the prepaid and wholesale area, hence the importance of deals like Straight Talk. Prepaid net customer losses, including MVNO customers, were 199,000 in the second quarter of 2010, compared with 41,000 net prepaid additions in the first quarter and 268,000 additions a year earlier. On the postpaid side, the picture was healthier - net additions were 106,000 during the quarter.
Data service revenues jumped 18% year-on-year to $1.17bn and accounted for $10.90 of the company's $47 total ARPU. T-Mobile said that 6.5m subscribers were using 3G smartphones by the end of the second quarter, a 25% increase from Q1. 3G-enabled smartphone customers now account for 19% of its device base and the HSPA+ service now covers 85m POPs in metro markets.
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