As Straight Talk starts selling the iPhone, TracFone sees jump in subscribers, revenue

iPhone 5 camera

TracFone, the country’s largest prepaid virtual operator, managed to outdo its impressive holiday performance in the usually tepid first quarter. It added 839,000 new subscribers to its total, more than the 753,000 it added in the fourth quarter and 127 percent more than its 369,000 net additions in last year’s Q1. TracFone even beat out mobile giant Verizon Wireless, which grew by 720,000 new subscribers last quarter.

Why the big boost? América Móvil, the Latin America multinational telecom provider that owns TracFone, didn’t give specifics. But it just so happens that in January TracFone started selling the iPhone 5 at Walmart through its Straight Talk brand.

The offer presents a cheap alternative for consumers craving Apple’s latest and greatest device. You still have to pay the unsubsidized iPhone 5 price of $649, but Walmart spreads it out over 26 monthly payments of $25. Meanwhile Straight Talk’s prepaid service comes in at just $45 a month, including unlimited SMS, voice and data, though Straight Talk will start throttling back speeds if you consume much more than 2 GB each month.

That plan is even cheaper than T-Mobile’s new “Un-carrier” $50 tier while also offering more data. The major drawback is that you  don’t get 4G access.  As a mobile virtual network operator (MVNO), TracFone buys network access from the major carriers. The iPhone deal uses either Sprint or Verizon Wireless’s CDMA networks, but so far Tracfone hasn’t gotten permission from either to use their LTE services, which can deliver data speeds up ten times faster than their older 3G EV-DO systems.

In its earnings statement (PDF), América Móvil said that its big subscriber gains are coming from Straight Talk and its new brand targeting Mexican nationals Telcel América. Both brands offer more expensive plans than Tracfone’s core prepaid service focused on budget users. Consequently, its average revenue per subscriber jumped 16 percent year over year to $19 a month.

There’s no way to know for certain whether the iPhone is driving those Straight Talk gains unless Tracfone starts releasing device figures. But more of the prepaid operators’ customers seem to be gravitating toward higher-end devices like the iPhone and purchasing more expensive service plans.

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