Blog Post

Smartphones make big gains in prepaid

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Smartphones long ago lost their hoity-toity status as the toys of the technological elite, but in the last few years they have been moving down to the lower rungs of the mobile market ladder. Smartphones accounted for 29 percent of all prepaid device sales in 2011, compared to just 5 percent three years ago, according new survey data from marketing research group the Stevenson Company.

Stevenson found that smartphones account for 50 percent of all mobile phone purchases in 2011 across prepaid and postpaid contract plans. Furthermore, while 63 percent of new postpaid phone buys are in the smart category, the smartphone gap between prepaid and contract users is closing, Stevenson found.

Contract subscribers usually get big discounts on their smartphones (though some carriers are fighting against the subsidy model), while prepaid users typically pay full price for a new device, so the numbers are a bit surprising. It shows that Android(s goog) smartphones are not only getting cheaper, but also that it’s not just the most budget-minded of consumers that are attracted to prepaid service.

Source: Stevenson Company

Stevenson drilled deep into the demographic data and found that half of prepaid buyers had a household income of $35,000 or more, compared to 76 percent of postpaid buyers, and more than 55 percent of prepaid buyers owned their own home. Income and credit are no longer the sharp dividing lines between prepaid and postpaid.

Stevenson also found that customers weren’t buying their prepaid services directly from operators. Wal-Mart(s wmt) was the biggest prepaid retailer in the country, Stevenson found, and its share of prepaid to postpaid phone sales is growing. Meanwhile Target(s tgt) is shifting from a primarily prepaid retailer to one split between the prepaid and contract sales. More shoppers are also moving online as Amazon(s amzn) saw big gains in prepaid sales in 2011.

Image courtesy Flickr user fourstarcashiernathan.

9 Responses to “Smartphones make big gains in prepaid”

  1. Lindsworth Horatio Deer

    Please note here: Prepaid is basically 30 day contract plans. the US mostly ruins on 2-year contract plans. These 30 day contract (Prepaid) are the equivalent of what we in Jamaica refer to as Postpaid!!!! Naming confusion i can never under…stand in Jamaican Telecoms.

    But if i’m reading the trend right, it means that the same is true in Jamaica…30 day contract plans are becoming attractive based on the OUR (Office of Utilities Regulations) recently released studies, which points to growth in Data Services, Postpaid (what the US calls Prepaid) and Fixed Line both Mobile and traditional Landline.

    All of which are 30 day contract called Postpaid (Jamaican) or Prepaid (US) plans

    • Kevin Fitchard

      Hey Lindsworth,

      What’s the situation in Jamaica as far as pricing? I’ve heard in many of the Caribbean countries, that pricing is prohibitively expensive, targeted mainly at the elite and tourists.

  2. Phil Jones

    so now, not in terms of sales but in terms of base, according to Stevenson, what is the % of prepaid vs postpaid?

    and did he find out about the share of unlimited plans in prepaid offerings, vs pay as you go plans? (probably growing)

    • Kevin Fitchard

      Sorry Phil, Stevenson didn’t really track that info at least not in the data sets I saw. They were mainly tracking new buyers, not install base. As for unlimited plans, are there really any true unlimited prepaid data plans left. T-Mobile offers unlimited but throttles after a set cap. MetroPCS has a bunch of conditions on their unlimited plans. The only one I can think of is the MVNO Republic.

  3. Data with Prepaid is cheaper. The Article written in Gigaom about LG Optimus around one year back prompted me to switched from Sprint to Virgin Mobile. I have been a loyal customer with Sprint for continous 10 years . They refused to provide the data plan with monthly minimal rate. Now , I have been with Virgin Mobile for about 13 Months & paying only $25/ month. It includes 2.5GB data + 300 anytime minutes. I am more happy and saving ridiculous monthly rates if I would have been with Sprint/ATT/TMobile.

    • Kevin Fitchard

      Hi Nathan, technically you still are a Sprint customer since it owns Virgin Mobile USA, but you’re right operators are often giving better deals for prepaid. You can’t tap into unlimited but at 2.5 GB per month, who needs it?

      • Technically that’s correct. One thing I cannot understand is Why Sprint charges more money for data compared to Virgin Mobile? (Eventhough Virgin Mobile customers uses the same Sprint Network for their data )