The presence of independent mobile virtual newtork operators (MVNOs) in the U.S. prepaid wireless market is not what it used to be. Verizon’s purchase of TracFone in 2020 and T-Mobile’s purchase this year of Ka’ena Corp. and its Mint Mobile and Ultra Mobile brands has had four major consequences, as detailed below, starting with the development of prepaid brand portfolios by the national carriers.
Carriers develop portfolios of prepaid brands
Verizon
Verizon now operates a portfolio of seven prepaid brands – Straight Talk, Total Wireless, Visible, Verizon Prepaid, TracFone, Simple Mobile and Walmart Family Mobile – having shuttered three brands formerly operated by TracFone. Those brands were Net10 Wireless, PagePlus Cellular and GoSmart Mobile. Verizon is using this portfolio for segmentation. For example, Straight Talk appeals to Walmart shoppers, while Visible appeals to tech-savvy customers who like to save money by ordering online and Simple Mobile sells well among shoppers at multi-carrier dealer stores.
T-Mobile
T-Mobile also has a rich portfolio of prepaid brands. Metro by T-Mobile has more subscribers than any other prepaid brand, while T-Mobile prepaid is sold at T-Mobile stores and at multi-carrier dealer stores. Mint Mobile is a direct-to-consumer brand, while Ultra Mobile is mostly sold via the multi-carrier dealer channel.
AT&T and EchoStar
AT&T and EchoStar are pushing two prepaid brands each. AT&T operates Cricket Wireless, which competes head-to-head with Boost Mobile and Metro by T-Mobile, but is also sold at national retail and the brand has some stores in rural areas. The other brand is AT&T Prepaid, which is sold via several channels. EchoStar operates Boost Mobile, which focuses on store sales in urban markets, while EchoStar’s Gen Mobile brand is positioned to win customers who are of low income and customers on public assistance.
Few independent, large MVNOs remain
No longer are there many MVNOs of size. Consumer Cellular has more than 4 million subscribers, making it the largest independent MVNO in the U.S. When Telrite Holdings acquired Locus Telcommunications and its H2O Wireless brand in 2019, the press release pointed to Locus having “approximately one million customers.”
Google Fi Wireless was thought to have “a couple million customers” as of April 2022, as Roger Entner of Recon Analytics told Fierce Wireless. I am not aware of any other MVNOs that are known to have more than a million subscribers.
Verizon changes its prepaid strategy
Until 2020, Verizon was only national carrier not to have a prepaid flanker brand operating nationwide. Sprint had Boost Mobile. AT&T has operated Cricket Wireless for a decade, while T-Mobile has operated Metro by T-Mobile since 2013.
Verizon was a distant fourth in the prepaid market through the end of 2019. Verizon Prepaid for many years the only prepaid brand sold by Verizon and the number of Verizon Prepaid subscribers never exceeded 5 million.
Verizon, however, did not take the prepaid market seriously before 2020. Former Verizon CFO Fran Shammo once famously said that Verizon’s wholesale relationship with TracFone was Verizon’s means of monetizing the prepaid market, as Fierce Wireless reported in April 2016.
Verizon’s prepaid strategy changed dramatically. Now, it has its own prepaid flanker brand, Total Wireless. Before July, Total Wireless operated as Total by Verizon. Total Wireless has “almost 1,000 stores” and Verizon Value Brands executive Lee Mrazek, speaking at the All Wireless & Prepaid Expo last August, said that “several thousand” such stores are likely to be in place at some point.
The purchase of TracFone by Verizon likely was motivated by a desire to improve profitability. Sure, Verizon had solid revenues from TracFone’s usage of Verizon’s network. However, revenues are much higher for retail lines of service than wholesale lines of service and this is particularly true for carriers who own a network.
In 2020, MoffettNathanson Research analyst Craig Moffett estimated that at the time of purchase, roughly two-thirds of TracFone subscribers were already using Verizon’s network, although this also means that one-third of the initial 21 million TracFone subscribers will become Verizon customers. For example, Simple Mobile traditionally has used T-Mobile’s network, meaning that T-Mobile is losing wholesale revenues.
Wholesale market declines by more than 23 million lines
Between the 21 million TracFone customers and the estimated 2.5 million Mint Mobile and Ultra Mobile customers, the national carriers have roughly 23.5 million fewer lines using their networks on a wholesale basis. Internally, carriers’ wholesale efforts are less important than they were several years ago.
One other change is that given its new nationwide network, EchoStar potentially could sign up MVNOs to use its network. This makes sense, as EchoStar could use the revenues and traffic on the network is much lighter than traffic on the networks of Verizon, AT&T and T-Mobile.
This is not to say that the wholesale market is dead. Consumer Cellular has more than 4 million subscribers and most of them are using AT&T’s network. Red Pocket and FreedomPop have not disclosed a customer count, but these sister brands are both sold at national retail and both have run TV advertising this year. Telrite Holdings continues as a significant AT&T wholesale customer, operating its H2O Wireless, PureTalk and Life Wireless brands.
Big changes to the prepaid market
Increasingly, the national carriers are operating portfolios of prepaid brands. In this environment, the challenge will be to do segmentation to win customers, without cannibalizing its brands or competing with its own brands. Wholesale efforts are must smaller than they were a few years ago. Verizon is putting significant effort into prepaid, having given it little effort before 2020. Finally, few independent MVNOs of size remain in the market. The prepaid market has changed greatly in recent years.
The All Wireless & Prepaid Expo is coming up next month in Las Vegas and this will be the first such Expo since the acquisition of Mint Mobile and Ultra Mobile. Carrier executives will be speaking at the conference and some carriers will have booths. I think we will have a better sense of all these changes via the Expo. The Expo’s website is here.
Jeff Moore is Principal of Wave7 Research, a wireless research firm that covers U.S. postpaid, prepaid, and smartphone competition. Jeff has 25 years of telecom industry experience, including 13 years of competitive intelligence work for Sprint. Follow him on Twitter @wave7jeff.
Op-eds from industry experts, analysts or our editorial staff are opinion pieces that do not represent the opinions of Fierce Network.