Even though the vast majority of many mobile operators’ customers now use prepaid plans, the prepaid market has changed little strategically since the first prepaid offerings were introduced years ago.
Examining the prepaid market today, it is clear that many operators are seeing their prepaid business deteriorate. What was once a highly profitable segment is becoming less attractive, and operators in many countries are actively trying to move customers from prepaid to postpaid plans.
At Strand Consult we spent nearly two person-years researching the prepaid market and identified 10 major trends that almost every mobile operator must address to avoid further decline in their prepaid business.
The 10 megatrends are:
1. Falling traffic prices — both outgoing and terminated calls.
2. Very cheap or free on-net traffic.
3. Low-cost international calling options.
4. Very inexpensive SMS bundles offering large volumes of messages.
5. Prepaid mobile broadband becoming more common.
6. Rising churn rates.
7. Distribution fraud — in the rush to increase SIM volumes, many SIMs are never activated or are misused, recharged and used multiple times.
8. Declining top-up values — electronic top-ups have lowered average top-up amounts in many markets.
9. Growing use of the Internet for distribution — online SIM sales and digital top-ups.
10. Multi-SIM usage — more customers hold two, three or more SIMs and switch between them based on who they’re calling, when, and why.
Consequences
Most operators recognize these trends. Together they are steadily eroding prepaid margins.
In some countries the impact is severe: intense competition drives up subscriber acquisition costs (SAC) while average revenue per user (ARPU) declines, and churn rates surge.
Mobile penetration figures above 120% are not a sign of a healthy market; they often indicate that many users maintain multiple SIMs.
Globally, some operators now see a prepaid segment that used to generate steady profit turning into a challenging, and in many cases costly, part of the business.
The price gap between prepaid and postpaid offerings has narrowed, yet prepaid customers typically generate substantially lower ARPU than postpaid customers.
As markets saturate, competition shifts from acquiring new subscribers to retaining existing ones. Price frequently becomes the primary competitive lever, influencing which operator customers choose for voice and data services.
Increasingly, consumers carry multiple SIMs from different operators and choose which to use depending on the call recipient, timing or purpose. Most users simply seek the cheapest access to voice, text, or data, without considering the broader consequences for operators.
Addressing these megatrends requires operators to rethink distribution, pricing, product design and fraud prevention. Effective strategies will balance short-term competitiveness with long-term profitability, focusing on tailored prepaid offers, better customer engagement, and controls that reduce distribution abuse. Without proactive measures, many operators risk watching their once-lucrative prepaid segments continue to decline.