Mobile News

The first prepaid mobile services were launched in Europe and the US in the second half of 1995. In 1996, there was a gradual roll out of many more prepaid services in other markets such as South Africa and Mexico. During 1997 and 1998 there was an explosion of services; many driven by the outstanding examples of Portugal and Italy.

The market has continued to grow at a phenomenal rate and now 90% of new mobile customers in many European markets are prepaid. The growth of the cellular market in many developing regions such as Africa and Latin America has been driven solely by prepaid. Vodacom launched its mobile services in South Africa in 1996 and forecasted 250,000 subscribers during the first ten years of operations. Vodacom now has 4 million customers and 90% of these are prepaid. This growth is continuing and Vodacom expects to have 10 million customers (or one in four of the population) in five years time.

But there are strong indications that the prepaid market has begun to level out. Mobile penetration has reached more than 70% in many European markets and saturation point has almost been reached in the UK and Germany.

In the last time many of the key operator objectives have been achieved: subscriber numbers have well surpassed expectations and new market segments which were hitherto thought impenetrable have now been reached.

But operators have also been victims of their own success. Airtime costs to the customer halved and Average Revenue Per User (ARPU) has fallen as a result. Recruitment costs have rocketed and customers in many markets are now accustomed to unrealistically high subsidies for handsets. Customers are demanding the same array of services as their postpaid cousins (such as high quality customer care) and operational costs have risen as a result.

Prepaid was once viewed as a means of using surplus network capacity. But now operators are having to alter their networks and revise all their tariffs in order to cope with increased congestion. Billing costs have increased as a result of the huge investments in platforms (particularly Intelligent Networks) that are required for real-time rating. Operators of prepaid services do not have bad debt but they are still losing between 2% and 5% of revenues as a result of fraud. The scratch card method of recharge (which is still used by 80% of customers worldwide) is very inefficient and expensive (such cards also expose operators to new types of fraud). Churn levels have reached between 25% and 50% worldwide. Many prepaid mobile services are currently operating at a loss.