Are Carriers Focusing More On Family Plans, While Targeting Single-Line Users Via Prepaid?

There is a growing trend wherein mobile operators in the United States appear to be putting more attention to polishing their respective family plans. At the same time, carriers seem to increasingly turning to prepaid options as a means for attracting customers, especially those with just one line of service. 

To cite an example, earlier this month, major US wireless carrier T-Mobile revealed that it was looking to get rid of its long existing Simple Choice options in order to focus more on its T-Mobile One unlimited offerings, even going as far as eliminating taxes and fees for customers on the unlimited plans. For those not updated, T-Mobile is currently selling one line of service (with unlimited voice calls, text messaging, and LTE data) for $70 per month for subscribers with accounts with Auto Pay. A second line of service means paying an extra $50 a month, while getting more lines (up to a maximum of eight lines) means paying $20 for each line. T-Mobile is cleverly positioning its unlimited plans as four lines of service for $40 a month, but upon closer examination, the T-Mobile One unlimited options are not always as cost effective as the old Simple Choice options for users with a single line. 

Mike Sievert, the chief executive officer of T-Mobile, is quick to dismiss the notion that the move might drive away single line customers. According to Sievert, most of those who only have one line of service tend to favor prepaid options anyway. He further added that T-Mobile still continues to offer single line plans on prepaid (both on T-Mobile and on its prepaid subsidiary, MetroPCS) that should attract single line customers.

As for postpaid options, there are plenty of reasons why mobile operators are favoring offering family plans now more than ever. For one, accounts that offer more than one line of service tend to have lesser customer turnover rates compared to single line plans. And while it is true that family plans do not generate as much average revenue per user (ARPU), the bills that are being paid on a monthly basis are generally higher, which sorts of balances out everything.

Another thing to consider is that the revenue gap between prepaid and postpaid has continued to narrow in the last few years. Last year, MoffettNathanson had projected T-Mobile to post decreasing postpaid ARPU (falling from $54.07 to $46.05) since the first quarter of 2013, while the wireless carrier’s prepaid ARPU will see an improvement (rising from $35.96 to $37.58).