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Thursday, August 9, 2012
 
America Movil's U.S. TracFone Strategy Gets Results
 

As competition stiffens in the pay-as-you-go wireless market, America Movil's TracFone unit seems a likely survivor of an expected shakeout. TracFone's success continues to come in the low end of the wireless market as two other prepaid carriers, MetroPCS Communications (PCS) and Leap Wireless (LEAP), target higher-spending smartphone users. Leap recently began selling Apple's (AAPL) iPhone. And MetroPCS plans an aggressive push into faster broadband 4G LTE data services this year.

TracFone's customers, many of whom buy prepaid cards and phones at Wal-Mart Stores(WMT) and websites like PREPAIDONLINE.COM, gas stations and other retailers, aren't big spenders on Internet access, email and data products. They primarily use cellphones to make calls.TracFone has carved out a niche catering to "voice-only" customers, says Macquarie Capital analyst Kevin Smithen. TracFone's customers on average spend only $16 a month on wireless services. MetroPCS and Leap subscribers spend 2.5 times more, roughly $40 per month. But with 21.34 million U.S. subscribers, TracFone has quietly amassed the most prepaid customers of any carrier in the U.S. Besides prepaid servicers MetroPCS and Leap, it leads the nation's big four mobile phone companies — Verizon Wireless, AT&T (T),Sprint Nextel (S) and T-Mobile USA.

"I think TracFone will continue to target voice-only customers at the bottom end of the market," Smithen said. He says the company can get to 25 million customers without having to cut prices."But I'm not sure who might take notice except Leap and PCS," he said, since most other carriers focus on bigger spenders. MetroPCS reported a net loss of 186,000 customers in Q2. On Monday, Leap reported 289,000 net customer losses and said it would enhance its higher-end services.

TracFone, however, added 106,000 U.S. subscribers in the three months ended June 30. That's in addition to the 1 million-plus subscribers it got from its May acquisition of Simple Mobile. TracFone sells wireless plans through the Straight Talk and Net10 brands. Walter Piecyk, analyst at BTIG Research, says the Simple Mobile deal gives TracFone a new marketing weapon, "SIM-only" service. Simple Mobile doesn't sell phones. It sells prepaid SIM cards that are plugged into phones. Customers take out the SIM cards of AT&T or another service providers and insert Simple Mobile's. SIM-only service has caught on in Europe, but not in the U.S. Still, Piecyk in a report calls TracFone's Simple Mobile deal "likely the first step in a broadening strategy.

 
Posted in Tracfone at 11:40:23 AM EDT
 
 
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