The Prepaid Press - September 15, 2008 - (Page 10)

PREPAID WIRELESS September 15 · 2008 - 10 Dateline Expo: By Gene Retske Prepaid Wireless Update 2008 carriers are entering the prepaid space directly. “How can you compete with that?” he asked. “you are in the same store. you are in the same distribution, and you are going to compete.” Csoka said that since you probably can’t be cheaper than them, you have to look for a new MVNO model, which he calls “MVNO 2.0.” He cites iPhone as a prime example of how MVNOs can offer a strong value proposition with compelling services through innovation. for both consumers and merchants, by making small transactions easier and faster to complete. Walton’s company sees the market increasing from an estimated 80 million cards issued in Mobile Payments But, the big buzz centered around mobile payments. Ginger Sayor, First Data Vice President, Product and Business Development for Mobile Commerce Solutions, explained that they are keeping a close eye on new technologies as a source of new opportunities. As a processor, they are driven by the need to be wherever electronic transactions are Holt said most of the MVNOs that failed simply lost control of expenses, and failed to focus on the fundamentals of making a profit. 2008, to 500 million cards in 2012. Niche markets are always an opportunity and mobile payments are no exception. Oscar Muñoz, President of Uni-Mas Corp, a Puerto Rico based provider of card based revenue systems for remittances, says, “As an acquirer, Uni-Mas has focused on using technological solutions.” Now, Uni-Mas is turning to mobile payment systems. Muñoz says their infrastructure provides the necessary structure to support mobile payments, and the ubiquity of Oscar Muñoz, Uni-Mas mobile devices in their focus market of Latin Americans makes it logical. Dubbed “Rocket Banking,” the system not only enables mobile payments by consumers to merchants, but it also allows primary cardholders to share money with friends and family anywhere. And, the sharing can be done using mobile phones. Card to card Mobile payments is a strong new application, blending wireless services and prepaid payments. needed. And, transactions are moving to a more mobile audience. “As we think about mobile commerce,” she said, “we bucket what we are doing into three different areas – mobile payments, mobile banking and account services, and mobile marketing.” Sayor related the details about a pilot program in San Francisco using BART. The trial used a contactless handset to not only enable commuter transit ticketing, but to allow location based marketing and mobile top-ups. “There were 250 NFC enabled handsets that were part of this trial,” related Sayor. “Thousands of rides and top-ups, and smart poster taps were performed.” She said one measure of success of the trial was Jack-In-The-Box, who had geared up its customer service and support to help smooth problems during the trial. “Virtually no one called,” she said. “They staffed back down to normal levels immediately.” Charles Walton, COO of Inside Contactless agrees about the potential of contactless payment systems. “What the market is really all about is beginning to get at cash,” he said. Walton believes that the market potential is about $600 billion a year in cash transactions that are between $1 and $25. “This is all about cash replacement,” he said. Speed and convenience are the primary drivers After nearly a decade of growth, prepaid wireless is now entering a more mature phase of its life cycle. Powered by new handsets, lower prices and flat rate offerings, prepaid wireless has room to grow, not just from its under-penetration in core constituencies, but from its attraction to contract, post paid, customers. A new word echoed around the Conference Room and the Exhibit Hall at TPP Expo 2008, and the word was “payments.” Mobile payments is a strong new application, blending wireless services and prepaid payments. Being a new concept, it is very fluid, and takes on different characteristics as the idea gels and grows. Prepaid Wireless – Market Update There are conflicting forces tearing at prepaid wireless today. On one hand, the market is going through a bit of a surge, due to an increase in MVNO sales, predominantly prepaid. On the other hand, a weak overall economy could put downward pressure on ARPU (Average Revenue Per User). The slowdown in wireless usage is across the board and includes prepaid and post paid. However, most analysts believe that the growth in wireless will come primarily from prepaid. Fedor Smith, Vice President of Atlantic-ACM, attributed the upswing in prepaid wireless revenues to an increase in the number of resellers (MVNOs) that are selling services. Smith sees the prepaid wireless market increasing until 2010 when it begins to level off. Over this period of time, Smith believes revenue will increase from the current $12.8 billion to $19.7 billion by 2012. Interestingly, Atlantic-ACM ranks three MVNOs – TracFone, Virgin Mobile and Boost – as the three biggest prepaid wireless providers, with almost 44% of the market, combined. “TracFone, Virgin and Boost have done a great Niche markets are always an opportunity and mobile payments are no exception. job of tapping a marketplace that major carriers have, to date, somewhat neglected,” said Smith. Vesta’s Rocky Scales sees the prepaid wireless market increasing 29% over the next four years, based on a recent yankee Group study. Among the strong growth markets were not just the credit challenged, but parents and kids, young adults and those who don’t want long term contracts. “There is a group of people in this category I call ‘contract-phobes’,” said Scales. “People that don’t want to be stuck in a two year relationship with a particular carrier.” Scales added that with the prepaid monthly plans that are coming out, contract-phobes can get the benefit of lower prices but without the commitment. Paris Holt, CEO of TelSPACE, an MVNO enabler, said, “In the MVNO space, every single year my numbers are coming to reality. What that shows is that MVNO strength is growing.” Holt said he knew that the high visibility MVNOs, like Amp’d and Disney, were going to fail because they did not pay attention to the Paris Holt, TelSpace basics, and did not control their own distribution. Holt said most of the MVNOs that failed simply lost control of expenses, and failed to focus on the fundamentals of making a profit. He said he serves MVNOs with as few as a thousand customers that are profitable. “The better the back office you have, the better off you are,” he noted. “The goal is to get your cost per customer, what we call G&A, down significantly. If you can get your costs down to a nominal amount, you are in good shape to be profitable.” Daniel Csoka, CEO of aKos Technology, agreed. He said too many of the failed MVNOs focused too heavily on marketing, and did not pay enough attention to actually selling and collecting. “At the end of the day, it goes back to the bottom line,” he said. “If my customers are not buying my product and paying for it, [clever marketing] doesn’t matter.” Even MVNOs who targeted specific demographics made mistakes. Csoka cited Movida, an MVNO that served Hispanics, and said that their failure was due, in part, because they did not manage their finances carefully, and couldn’t pay carrier bills. Csoka acknowledged that margins are deteriorating. Price wars have eroded prices, making it more difficult to make profits, he said. In addition, relationships with the host carriers are becoming strained as more of the underlying facilities based Fedor Smith, of Atlantic-ACM, sees the prepaid wireless market increasing until 2010 when it begins to level off. transfers can also be accomplished using SMS. Muñoz said that the new applications enabled by Uni-Mas opens a new opportunity to increase ARPU, and enhance the stickiness of the mobile service. Despite the troubles and challenges in prepaid wireless, it is obvious that there are also significant opportunities waiting to be exploited. Prepaid Market Share (subscribers) 2Q’07 Other US Cellular Locus Alltel Verizon TracFone 21% Leap 11.9% Virgin Mobile Metro PCS 10.9% 10.4% AT&T T-Mobile Boost Mobile

Table of Contents Feed for the Digital Edition of The Prepaid Press - September 15, 2008

The Prepaid Press - September 15, 2008 ISOs Hold Key to Growth in Prepaid Industry Contents From the Publisher: The Show Goes On Regulatory Rundown: Early Fall Regulatory Beat 5 Minutes With Brian Rudolph, Co-owner, Krush Communications TPPEXPO’08 Spotlight Dateline Expo: Prepaid Wireless Update 2008 Wireless in Brief MetroPCS Available at Best Buy Western Capital Resources Inc. to Acquire PQH, Inc. TracFone Launches SafeLink Wireless Prepaid Wireless Roundup CIT Secures Financing for Prepaid Wireless Company MetroPCS Premiers Loopt Social-Mapping Services Virgin Mobile USA Reports Financial Results Dateline Expo: Prepaid Calling Card Update 2008 Inc. 5000 Recognizes Viscom International USAC’s “Carrier’s Carrier” Rule Comes Under Attack NetIQ Extends VoIP Management to Microsoft Office Transverse Launches OSS/BSS Open Source Platform Calling Cards in Brief Dateline Expo: Prepaid and Alternative Payments Update 2008 NETELLER and TransSend to Offer Cards Payments in Brief U.S. Treasury Introducing Direct Express Debit Card Visa Launches New Mobile Payment Services SCX Global Acquired by Rev Worldwide Metavante Selected by Corporate Network eCom ACE and NetSpend Launch March of Dimes Card AccuPOS Announces AccuCount Software Springbok Offers Private Label Prepaid Cards Prepaid 101: ATMs and Prepaid NACS Releases State of the Industry Report PaySpot to Distribute Futura Cards Hypercom Lands Element Payment Services Retail Focus in Brief Our Advertisers Contact Us

The Prepaid Press - September 15, 2008

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