Regional CDMA operator Leap Wireless (NASDAQ:LEAP) announced this week it would add unlimited mobile Web surfing and 411 services to its $40 per month unlimited voice and texting plan. Leap’s plan is now comparable to MetroPCS’ (NYSE:PCS) $40 package announced last week, and marks the latest competitive move in the prepaid space, one increasingly defined by industry-wide falling price points.
In just the last six months, unlimited prepaid prices have fallen by 60%, according to Bernstein Research. Boost Mobile was the carrier responsible for kick-starting the price war, when it launched a $50 unlimited plan that was quickly followed by T-Mobile, Virgin Mobile – recently acquired by Sprint, Metro and Leap. Tracfone was the most recent to introduce its $45 unlimited Straight Talk plan, undercutting the $50 players. Boost, however, is not interested in participating in the price war it started, according to Chief Service Officer Kelly Owens St. Julian – a sentiment company executives have echoed in the past.
“I see [$50] as the standard for us,” St. Julian said. “There are certainly other carriers going below that point, but we tend to believe that you get what you pay for. With that $50, you are getting a great value, great quality of network and a lot of other things included in that price without the add-on fees and things that go along with a low-price point that then has to have things added to it.”
Coming off a successful quarter in which it drove customer additions for parent company Sprint, Boost instead is focusing on emphasizing the value of its brand - not the price. It is also expanding its retail presence with its own retail stores, Sam’s Club, Car Toys and, as of today, Barnes & Noble College Booksellers. Yet even as it focuses on its own growth and opts to stay out of a price war, battle is raging all around the company.
Tier-one carriers have even responded to prepaid by adjusting and reemphasizing their prepaid services. Even Verizon, which claimed it’d stay out of prepaid, lowered all its smartphone prices to below $99 – a higher subsidy to offset more expensive service plans. For better or worse, a price war has been inevitable since Boost made its original announcement. Boost may not be responding today, but as the line continues to blur – it might not be the only one that has to.