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Shortages, Promotions Shaped US Prepaid Market in Q3 2021

The third quarter of 2021 is in the books and the major US carriers have announced their end-of-quarter results. While the postpaid segment saw healthy growth across the board, the prepaid segment was a mixed bag, with shortages impacting low-end LTE devices and leaving the carriers to fight for supply. Additionally, 5G network competition between AT&T and T-Mobile, in particular, is driving strong promotions on low-price 5G devices at Cricket and Metro by T-Mobile. Meanwhile, Verizon Prepaid and Boost Mobile continued to struggle in Q3 after they had difficult starts to 2021. TracFone brands also struggled during the quarter with the shortage of low-end LTE devices. These trends are likely to continue in Q4 and intensify due to a number of key factors.

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Cricket and Metro battle for net additions
AT&T dominated prepaid net additions this quarter with 249,000 net additions between its AT&T Prepaid and Cricket brands, with Cricket leading the charge. T-Mobile had decent growth with 66,000 net additions through Metro by T-Mobile. Both Cricket and Metro by T-Mobile featured strong promotions on some of the latest and greatest low-end devices for switchers throughout the quarter. These promotions were significantly better than those offered by Dish through Boost Mobile. The devices on offer were newer than many in Tracfone’s older, though cheaper, portfolio.
T-Mobile and AT&T also benefitted from their device portfolios. Metro in particular focused on driving 5G devices into the hands of its subscribers, taking advantage of T-Mobile’s significant network lead. For Metro, almost 40% of the devices sold in Q3 were 5G, meaning a sizeable portion of its supply was unaffected by the low-end LTE chip shortages experienced in the quarter. Additionally, Metro was able to rely on its diverse portfolio to avoid some impact from shortages. Besides selling popular devices from Samsung and Motorola, Metro also offers a range of devices from OnePlus and its own REVVL brand, which helped sustain sales when Motorola and Samsung were experiencing shortages and vice versa. While each brand was impacted by shortages at different points in the quarter, Metro could rely on other brands for supply. More can be read about T-Mobile’s momentum here.

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AT&T’s prepaid brands were in a similar position as Metro by T-Mobile. Besides offering a wide array of the latest Samsung and Motorola devices, Cricket also offers devices from Alcatel and Nokia HMD in addition to Cricket white-label devices. While these brands were impacted by shortages at some points in Q3, Cricket could rely on supplies from at least a couple of these brands at any given point. You can read more about AT&T’s recent performance here.

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Another major factor driving prepaid subscriber growth for AT&T and T-Mobile is their growing 5G networks. 5G is already a big draw at Metro by T-Mobile where strong promotions on devices like the Samsung Galaxy A32 5G, OnePlus Nord N200 5G and T-Mobile REVVL V+ 5G have driven 5G phones into the hands of consumers and traffic onto T-Mobile’s nationwide 5G network. Cricket also featured decent promotions for 5G devices but not to the same extent as Metro. Cricket is likely to push 5G in Q4 following announcements that 5G plans will be available to its subscribers at no additional charge and leading up to the launch of AT&T’s 5G mid-band network. Access to a dependable nationwide 5G network is a sizeable advantage for Cricket and Metro. Metro will likely do even better during Q4 as T-Mobile expands into over 2,300 Walmart stores where prepaid dominates handset sales.

Boost Mobile, Verizon Prepaid and TracFone lose subscribers in Q3, face headwinds in Q4 and early 2022
Dish struggled to retain subscribers yet again in Q3 and faces major challenges in Q4 and early 2022. An older portfolio of devices and relatively poor promotions put Boost at a competitive disadvantage compared to Metro and Cricket. Verizon Prepaid brand also struggled in Q3, losing three thousand subscribers. Marketing for Verizon’s Visible brand has improved but overall has little momentum in terms of adoption. Meanwhile, TracFone brands lost 185,000 subscribers during Q3, which was partly due to supply issues. During a conference call, América Móvil CEO Daniel Hajj said the following regarding TracFone: “…we are seeing a little bit of [a] problem of handsets. So, we don’t have enough handsets to sell…really the problem in the handset business is more on the low-end or mid-end segment of prices on those handsets than in the high-end prices.” Supply shortages coupled with greater competition from Metro by T-Mobile at Walmart, a key sales channel for TracFone, will likely make the fourth quarter even tougher for TracFone.
Boost and TracFone are likely to face subscriber and revenue losses in Q4, too. While Boost caught a break when T-Mobile announced it would be pushing back its CDMA network shutoff until the end of March 2022, subscribers still need to be migrated onto its LTE network and given an LTE device, which will be in short supply. With service interruptions and supply issues, many consumers may look for other operators. TracFone will be in a similar position, especially once Verizon’s acquisition of the MVNO goes through, which is expected at the tail end of Q4. Millions of subscribers will need to be migrated onto Verizon’s network, which may lead to high churn and demand for low-end LTE devices. Shortages again could hold back growth. However, things may turn around soon for both. If Boost’s 5G network launch in early 2022 attracts subscribers and improves its economics, then its strategy of shedding high data usage and high-cost subscribers can be replaced with the one focused on attracting high data usage and high-revenue subscribers. Similarly, if the TracFone acquisition by Verizon goes through without a hitch, customers may be lured in by Verizon’s impressive network quality. More about Verizon’s recent performance can be read here.

Counterpoint research is a young and fast growing research firm covering analysis of the tech industry. Coverage areas are connected devices, digital consumer goods, software & applications and other adjacent topics. We provide syndicated research reports as well as tailored. Our seminars and workshops for companies and institutions are popular and available on demand. Consulting and customized work on the above topics is provided for high precision projects.

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