MetroPCS Communications and Leap Wireless International, two of the top sellers of pay-as-you-go wireless calling plans for low-income consumers, are targeting more-affluent users to spur growth.
Leap announced a deal this month to use the network of bigger rival Sprint Nextel. The company is trying to get greater shelf space at big box retailers, including Best Buy. MetroPCS is upgrading its network to deliver faster download speeds. Both companies are ramping up efforts to court business customers and release costlier devices such as smartphones.
The moves are designed to widen the appeal of prepaid calling so Leap and MetroPCS can gain more of the $152.6 billion U.S. market for wireless services. The existing pay-as-you-go audience is almost saturated and new mobile users favor multifeature handsets sold by such top providers as Verizon Wireless and AT&T “Prepaid was always niche, very low-end,” says Sam Simon, a scholar at New Millennium Research Council, a Washington-based think tank. “Now what competes with it is the smartphone.”
MetroPCS is the third-largest provider of prepaid calling, which generates 10 percent of the industry’s revenue, according to IDC, a research firm in Framingham, Mass. This indicates prepaid sales of about $15.3 billion. The market is led by TracFone Wireless, owned by America Movil SAB, Latin America’s largest wireless provider. Sprint Nextel, based in Overland Park, Kan,, ranks second, with Leap at No. 6.
Leap Aims To Go Nationwide in 2011
Concern about Leap’s growth sent its shares to a record low this month and added to pressure to renew merger talks it has sporadically held with MetroPCS for more than three years, says Craig Moffett, an analyst at Sanford C. Bernstein & Co. “The prepaid market is not getting any bigger,” says Moffett.
Leap plans to use the Sprint Nextel network to provide coverage nationwide starting mid-2011, compared with 36 markets now….