MetroPCS, which has recently expanded its prepaid wireless service offering to several large cities throughout the U.S., has just lowered its unlimited monthly plan to $40 a month for voice, texting and Web access.
The new lowered prices ushers in a new era of competition in the prepaid market, which is heating up as Sprint Nextel announces this week its intent to buy Virgin Mobile USA for $483 million.
MetroPCS, a regional prepaid operator, is now adding unlimited email, navigation and social networking to its $45 a month unlimited plan. This is in addition to unlimited voice, texting and Web access. These plans are now $5 a month less than they were before the price cut was announced.
The company also offers a $50 a month unlimited plan for smartphone users, which includes unlimited HTML Web browsing.
The move is a clear indication that MetroPCS is ratcheting up the pricing pressure to compete more aggressively in the crowded prepaid market. TracFone, which is the largest prepaid carrier in the market, offers a $45 a month unlimited plan for voice, text messaging and 30 MB of data. And Sprint's Boost Mobile prepaid brand started offering a $50 a month unlimited plan in January. Executives are attributing the recent growth in its prepaid customer base to this new service.
MetroPCS's cuts could spark a price war, which could further drive down how much revenue is generated per user. In a market that already relies on heavy customer volumes and super low cost structure to reach profits, further pricing pressure will only make it more difficult for these carriers to make money with prepaid services. But the good news for consumers is that they will get access to some very good deals in wireless if the choose to take the prepaid wireless route.
Regional prepaid cell phone carrier MetroPCS announced Wednesday a new plan that allows its customers to make unlimited international calls to over 100 different countries for only $5 extra a month.
To be eligible for the $5 unlimited international calling plan, users must already be signed up to an unlimited national calling plan that costs $40, $45, or $50 a month. Making international phone calls from a cell phone has typically been rather expensive with major carriers such as AT&T and Verizon Wireless.
For example, AT&T offers its WorldConnect service for $3.99 extra a month, which gives subscribers lower rates on international calls. This means that a call to France still costs 22 cents a minute even with the $3.99 a month WorldConnect plan. By contrast a call to France using MetroPCS' new $5 unlimited international plan is free.
MetroPCS mainly competes against other prepaid services such as Sprint Nextel's Boost Mobile and Virgin Mobile USA. But recently as the economy has tanked, it has been stealing some customers from traditional carriers. With its unlimited plans and an expanding network, MetroPCS offers mainstream cell phone users an alternative to expensive contract services from the big carriers.
And now for people who make calls to friends and family in other countries, MetroPCS offers an even more compelling reason to switch to its service. Of course, the main drawback of the service is coverage. Even though MetroPCS is expanding its network to cities such as New York and Boston, its footprint is still relatively small compared to the major carriers. Most of the areas it covers are near major cities. But for customers in the MetroPCS markets who don't leave those markets very often, it offers a good deal compared to the post-paid, contract plans of the major carriers.
One other potential drawback is that MetroPCS, like other prepaid operators, doesn't offer the latest and greatest phones. That said, it does offer the BlackBerry Curve.
Correction: Virgin Mobile began selling its $50 unlimited plan in April after the first quarter had ended.
Competition in the prepaid cell phone market is heating up, making it more difficult for companies, like Virgin Mobile USA, to hold onto subscribers in an increasingly crowded market.
Virgin Mobile USA, a longtime player in the prepaid cell phone market, reported Monday it had lost a total of 133,292 net customers during the quarter to end the period with 5.2 million subscribers. Even though subscribers were up 2.8 percent compared with last year, the company's losses during the quarter point to growing competition in the prepaid market.
The market appears to be especially competitive when it comes to flat-rate, contract-free wireless services. Regional players Leap Wireless International and MetroPCS, which have long offered cheap flat-rate services, reported strong subscriber growth during the first quarter, as they each expanded into new markets. And Sprint Nextel's Boost Mobile, which began offering its $50 unlimited plan in January, also added about 764,000 new subscribers in the first quarter.
Virgin Mobile, which had been successful in the past selling pay-as-you-go service in the U.S. market, lowered the price of its all-you-can-eat plan in April to $50 a month, as well. The company also launched the Pink Slip Protection program, which offers customers who have lost their jobs free service for three months.
Virgin Mobile has managed to improve its churn rate, or the rate at which subscribers leave its service. The company reported that its churn fell to 4.8 percent from 5.1 percent during the same period a year ago.
The company sees the $50 flat-rate plans and other "hybrid" plans, which offer a set number of minutes at a standard price without a contract, as its growth engine for the future. Chief Executive Dan Schulman said that 55 percent of the gross customer additions during the quarter came from "hybrid" plans, according to the Wall Street Journal.
This makes sense given that consumers say they are considering prepaid cell phone services as a way to reduce costs and avoid lengthy carrier contracts.
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