Mobile operators are increasing their focus on the "untapped potential" of pay-as-you-go services as the monthly contract market becomes increasingly saturated and competitive, research has suggested.
Newly published analysis from Frost & Sullivan revealed that revenue from US prepaid mobile subscribers totalled $4.5bn in 2004 and is projected to reach $8.7bn in 2011.
To exploit the lucrative potential of the prepaid wireless sector, participants have made their offerings more attractive which has helped to differentiate products and reduce customer churn rates.
The study said that operators are developing prepaid services in line with post-paid offerings, while strengthening potential partnerships with large branded mobile virtual network operators that provide subscribers with differentiated data service offerings.
"In an increasingly competitive market, it is crucial that market participants do whatever they can to seize as many customers as possible," said Frost & Sullivan industry analyst Wai Sing Lee.
"In the future, once the market hits saturation, the only way to grow will be to steal one another's customers and this is a much more difficult undertaking."
The wireless participation rate in North America is now well over 50 per cent, and other market areas such as Europe and Asia have shown that saturation occurs at around the 75 to 80 per cent mark.
The study noted that prepaid wireless market participants have to address a variety of issues in order to win over new customers.
These include higher price per minute plans when compared to post-paid offerings, a lack of contracts between participants and customers which makes it difficult to tailor products more closely with customer needs, and a higher price for data services such as text messaging.
"Nonetheless, vendors are moving ahead with strategies to capture as much market share as possible before it is too late," said the report.
"Efforts include lower voice prices, better handsets, superior customer care services, and ease of replenishment with automatic bank payments.
"Lowering voice prices does not necessarily mean accepting lower profit margins. Data services are being offered that help to make up the shortfall when voice prices are lowered."
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