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.

T-Mobile Looks to Shake up Wireless Competition in National Retail

Aiming to more than double its footprint in US national retail channels, T‑Mobile will soon start selling its wireless plans at 2,300 Walmart store locations across the US. This is timely and could be very beneficial for T-Mobile. The carrier is under-indexed in rural America. With its improved 4G and 5G coverage, it can get far more aggressive in rural areas where its network has been uncompetitive in the past.

According to Counterpoint Research’s US Monthly channel share tracker, national retail accounted for 14% of the US smartphone sell-through in the second quarter. Walmart remains the largest national retail channel followed by Best-Buy, Target, Costco and Sam’s Club.

Exhibit 1: US Smartphone Sell-through by Sales Channel

Source: US Online-Offline Monthly Channel Share Tracker (Q2 2021)

Walmart Targeted at Low-End & Mid-Tier

Sales at Walmart remain targeted towards mid-tier and low-end wireless retail opportunity. Smartphone brands like Samsung, Motorola, Alcatel and white-labeled AT&T and Cricket devices remain very strong at Walmart. The competition in national retail remains heavily in favor of TracFone brands (such as TracFone, Straight Talk, Total Wireless, NET10 and Simple) selling in Walmart. This places Verizon in a very favorable position as it looks to complete the integration of TracFone by the end of 2021.

Exhibit 2: US Prepaid Brand Ownership and Sales Channel

While AT&T, too, enjoys a strong prepaid presence with Cricket and AT&T prepaid, Dish is likely to be the dark horse that can disrupt the competition in national retail. Dish, which now owns the Boost Mobile brand, has been on a buying spree that will likely continue. The #4 US carrier acquired Republic Wireless in March 2021, Ting in August 2021 and Gen Mobile in September 2021. This takes Dish’s prepaid subscriber count to over nine million and brand count to four in national retail.

Prepaid-Postpaid Migration

In 2021, postpaid deals have been very strong for premium smartphone devices. 5G remained at the center of the three national carriers’ marketing focus. BOGOs and $800+ trade-in deals on new iPhones and Galaxy S21 remained consistent throughout the year, leading to a higher migration in favor of postpaid. This trend of deals is likely to continue in Q4 2021 and 2022, making competition in prepaid more intense.

While Metro by T-Mobile and Cricket account for the majority of the net adds, Dish and Verizon (especially after the Tracfone acquisition) will now be looking to advance their subscriber base. Dish with its four prepaid brands would likely expand its presence in national retail. It is expected to start selling in Target stores in October 2021. Earlier, during an investor presentation, Verizon’s John Dunne also hinted at broadening Verizon’s prepaid offerings. We can expect Verizon to get more aggressive within prepaid if the TracFone deal is completed in Q4 2021.

Overall, national retail remains key to US carriers’ wireless retail strategy. Carriers continue to pay lucrative per-line commissions to retailers. The key target of the carriers is to capture the “customer lifetime value (CLV)”, as 5G opens up new opportunities, and/or finally have them upgrade to a premium unlimited plan.

US Prepaid Channels Could Feel Components Supply Crunch Soon

After a tough 2020 where annual smartphone sales shrank by 15%, Q1 2021 looks promising. Our weekly counts hint at a 15-20% bump from last year – very positive even considering the weakened Q1 2020 affected by pre-COVID jitters.

At the high-end there has been record buying of iPhones and strong comparative YoY performance of the Galaxy S21 v S20 Series, lifting the premium market significantly. On the low, the budget segment has remained resilient, growing its share by 15% last year to account for one in every five devices sold. So far this year, prepaid device sales have been ticking up on stimulus buying and aggressive carrier promotions. Tax refunds and third round stimulus checks will only boost demand moving forward.

The supply side is where the issues lie and we believe the budget segment is most at risk based on a number of factors:

  • LG’s departure is a blow for many prepaid carriers and retailers. Korea’s ‘other’ brand accounted for one-third of all US devices sold in the $100-$250 wholesale price band last year. Others will try to fill the vacuum, but the OEM was a channel favorite, especially amongst prepaid carriers which heavily promoted LG devices.
Counterpoint Research US Smartphone Display Size Share, $100-$250
Source: Counterpoint Research US Channel Share Tracker, Feb 2021. *Preliminary Jan/Feb figures.
  • Our February channel checks show little wiggle room:
    • Prepaid channel reps see inventories as “tight but OK”. This could change quickly.
    • Prepaid channels are also experiencing increased foot traffic and declining inventories, with constraints for models such as the budget Samsung A11 and A21. LG’s Stylo 6 is low stock and continues to be the most popular model in prepaid.
  • Finally, Samsung and Apple have strong supply chains with suppliers that prioritize deliveries, especially in the case of Apple. In a situation where components are in short supply, this means others will lose out – and those vendors are likely to be makers of cheaper devices.

The looming component shortage which is impacting the broader market is already affecting budget segments. Lower-end 4G application processor chip supply has been constrained on and off since last year and tightness is expected to continue through the end of 2021.

Magnifying the problem, this year’s budget phones increasingly resemble last year’s premium, boosting the need for other key components – especially those in acute shortage like CMOS image sensors (CIS) used in cameras, display driver ICs (DDIC) which control the pixels in displays, and power management ICs (PMIC) which manages power for various applications.

The best-selling LG Stylo 6 is a good example. At around $250 retail, it sports a triple rear camera setup with 13MP main and massive 6.8” screen – specs consumers prioritize when shopping for a device. The draw on CIS, DDICs, and PMICs is high for this type of smartphone and may not be sustainable, resulting in abnormally low inventory across prepaid channels.

Counterpoint Research US Smartphone Display Size Share and Main Camera MP
Source: Counterpoint Research US Channel Share Tracker, Feb 2021. *Preliminary Jan/Feb figures.

Globally, we saw inventory levels over the last three months of 2020 trend downward – opposite of what has happened in the past and signaling an overall tightening of supply. If the decline continues through Q1, it could spell bad news for the US prepaid market which could be more severely impacted than others.      


Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts:

Jeff Fieldhack


Counterpoint Research

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