Wednesday, May 7, 2014

Bullet Point Analysis: Boost Mobile Moves Defensive - The Battleground 40, 50, 60 Price Points


On May 6, Boost Mobile replaced its old monthly plan portfolio with a new Unlimited Select plans at three price points and specific data thresholds.


The prepaid sector is often characterized by high churn profiles and low credit scores. However, it is also a sector with high revenue and subscriber growth potential, courting feature phone upgraders (either prepaid customers or postpaid users looking for better deals in prepaid).  Sprint has made big bets on prepaid as a corporate growth engine. Prepaid subs represents 28% of the overall Sprint customer base.  Various sub brands (Assurance, Boost Mobile, Virgin Mobile) address specific prepaid demographics.  Yet 1Q14 was a bad quarter for prepaid with 465K losses, most of it blamed on Assurance brand losses. Boost's unlimited plans (along with Virgin Mobile's Beyond Talk plans) that garner higher monthly ARPU is clearly an important revenue component to Sprint's prepaid strategy and needs to be protected.  

Now with Boost's new plans at $40, $50 and $60, these numbers are the magic competitive price points to wage the prepaid war in mid to late 2014.  Boost Mobile is merely catching up defensively to rivals that already presented those price points and sometimes the same data thresholds.  

  • AT&T's flanker brands Aio/Cricket is in integration mode but Aio's price points and data thresholds match directly with the new Boost plans.  AT&T has been very vocal about being aggressive in attaining growth at the 'low end' using Cricket and will be a threat Boost.   Tactically, it's likely that the unified Cricket portfolio will come out with the added lower $40 price point (Currently $50-$70).  Moreover, AT&T's mid-April GoPhone plan action added a $40/500 MB plan to match T-Mobile's $40 Simple Starter launched earlier 10 days earlier.
  • T-Mobile's MetroPCS plan portfolio already has the same price points and always has been a strong competitor to Boost. By T-Mobile's 1Q14 prepaid earnings metrics, MetroPCS is doing well and though T-Mobile doesn't break out its contribution, the company added 465K prepaid users.  T-Mobile's internal code word in launching new markets is Apollo. The company is up to 30 new markets and continuing.  This Metro expansion has not only eaten into Cricket marketshare, it certainly has impacted Boost.    

Every competitor has its own differentiation despite the same price points. The challenge is to communicate this to the target audience and cut through the usual selection criteria of device and plan pricing.
  • AT&T's GoPhone portfolio has the advantage of built-in international calling and messaging while rivals MetroPCS and Boost need international package add-ons.  
  • The new Cricket has high hopes and promise for its parent. Its primary focus is to recapture lost ground from MetroPCS and Boost will be impacted in the mix. It's uncertain if Muve music, which was an apparent differentiator, will continue to be promoted.  UPDATE: Muve Music is said to be on the auction block. Certainly, at a minimum, the expanded underlying AT&T LTE footprint and perhaps speed will be touted.
  • MetroPCS continues to expand in an effort to migrate its legacy CDMA users (featurephone) to new LTE handsets on top of expanding its distribution to grab marketshare in new markets.  Boost's plans again are catching up to MetroPCS.
Boost Mobile needed to make its latest portfolio change to keep up with its main competitors.  There aren't any features in the new Unlimited Select plans that stand out against competitors. Boost Shrinkage discount approach is unique but how well does that retain a fickle customer segment?  Cricket and AT&T plans stand out as unlimited international texting (and limited international calling for GoPhone) are baked in.  Metro and Boost need to figure out if these features are competitively substantial in winning prepaid monthly adds.