WHAT IS IT?
On April 18, AT&T announced two smartphone GoPhone prepaid plan adjustments and introduced a Wal-Mart specific plan:
COMPETITIVE IMPACT?
On April 18, AT&T announced two smartphone GoPhone prepaid plan adjustments and introduced a Wal-Mart specific plan:
- The $60 plan increased data from 2 to 2.5 GB + enabled Wi-Fi hotspot capability + unlimited talk
- The $40 plan increased data from 200 to 500MB + 500 minutes of talk
- Available at Wal-Mart stores nationwide, a new plan with 1GB of data for $45 a month + unlimited talk
Existing $40/$60 plan customers will automatically receive these increase data levels. Moreover, not announced, the smartphone $50 unlimited calling and texting plan with WiFi-only (no data allotment) is no longer available. Though the plans are supposed to kick off on April 25, the changes are already available online.
ANALYSIS
The plan action with three components are a mix of defensive and offensive moves. Anytime a company makes a change, there are clearly causes and effects.
- As I wrote in my previous post on T-Mobile's newly launched $40 Simple Starter, that plan threatened prepaid competitors. Eight days later, AT&T shored up its entry $40 GoPhone plan seemingly in a defensive move to match Simple Starter data threshold of 500 MB. On the surface, it's merely a match but AT&T provides a differentiation for a specific segment of prepaid audience, those who text internationally. Still, Simple Starter addresses the needs of the talker as the plan offers unlimited calling; AT&T only provides 500 anytime minutes. Against Verizon's $45 ALLSET, $40 price point comes out ahead for the price sensitive though Verizon's add-on data options offer better value.
While the $40's nemesis was T-Mobile, the $60 GoPhone plan goes up against the Sprint's prepaid SmartPlus unlimited plan at the same price point with the same 2.5 GB threshold (throttled to 3G afterwards). Sprint's other prepaid brands Boost and Virgin Mobile match other competitors such as MetroPCS and Cricket best.
- Finally, the tell tale sign of an offensive against Tracfone's Straight Talk is a Wal-Mart only plan. The $45/1GB plan matches the price point exactly though StraightTalk is unlimited and throttled after 2.5GB. The AT&T brand, WiFi hotspot tethering, as well as LTE access could be a differentiation but traditional value Wal-Mart shoppers may simplistically look at more data.
- The ace in the hole for GoPhone is international messaging that competitors do not offer for the respective price points. This will appeal stronger to a specific subscriber demographic. Provided that AT&T heavily markets this either in niche advertising or social channels, it may be lost.
AT&T's prepaid moves should be construed as urgent since it has lost prepaid subs for the last two quarters ( -32K 4Q2013 & -50K 1Q14). Though the year-over-year view (-166 4Q12 & -184K 1Q13) looks better, the long and short of it is AT&T lost subs. By contrast, Verizon Wireless has had positive prepaid growth for the last eight quarters, decent for a primarily postpaid company whose prepaid subs are less than 6% of the retail/branded customer base.
- AT&T's GoPhone move is just one component of a reversing prepaid strategy which mainly hangs it hat on the new Cricket market expansion. T-Mobile's MetroPCS brand had been targeting AT&T and Cricket heavily with the 'Apollo' market launches. In the 1Q14 earnings call, AT&T said that the new Cricket will re-launch at the end of 2Q14, likely targeting T-Mobile and MetroPCS trying to reacquire lost subs. T-Mobile's entry plan featurephone switching growth may be blunt if AT&T markets heavily against that segment.
- Sprint overall needs to consider international messaging for postpaid and SmartPlus given this AT&T action. It may be too early to see how Sprint branded prepaid performs since Sprint doesn't specifically break out brand performance.
- Verizon's ALLSET plan's $45 price point doesn't match well but it may be unlikely that a plan change is unnecessary unless AT&T makes inroads for a couple of quarters and attains notable marketshare.
