Boost Mobile blurs line between pre-, postpaid markets

Boost Mobile took prepaid to an all-time low today with its announcement that it will sell $50 unlimited monthly service with no hidden charges beginning next week. Sprint’s prepaid arm made it clear in its press release it is going after regional providers MetroPCS and Leap Wireless, but it could also significantly impact tier-one carriers, as the economy drives more consumers to consider going prepaid.

“This really brings the competition on the postpaid side into the prepaid, which is already competitive,” said Whitey Bluestein, founder of strategic advisory firm Bluestein & Associates. “They are hoping to expand the entire market. In other words, they may affect the postpaid market as much as the competitors they name on the prepaid side because of the economy.”

The national calling plan includes unlimited calls, text messaging, Internet browsing and push-to-talk over Sprint’s iDEN network. No hidden charges means, outside of sales tax, there will be no extra fees, no roaming or overage charges and no activation fees. With most consumers today on $39.95 plans that actually come out to more than $50, this is no small announcement, Bluestein said. It is the sub-prime market’s version of Simply Everything at a time when the prepaid market, once the domain of youth, is growing.

“I think post-paid operators have to be a little concerned and might be getting the question more in their stores on the difference between their $100 and $120 unlimited plan and Boost’s,” Bluestein said. “If the only difference is I pay you at the beginning instead of the end of the monthly service period, I’m not sure that is all that much of a difference.”

Boost’s $50 prepaid plan first and foremost pits it against regional CDMA services Leap Wireless’ Cricket and MetroPCS, which specialize in local wireless calling plans. The operators come the closest to Boost’s new price plan, with packages in the $60 range, while Virgin Mobile – a Sprint MVNO, offers an $80 unlimited plan. Leap and Metro have also received more attention lately as they’ve broadened their coverage and signed up more customers to their low-cost, contract-free plans. By targeting a growing demographic of lower-income customers who rarely travel, MetroPCS currently has about 5.4 million customers, while Leap had nearly 4 million at the end of 2008.

Likewise, Sprint’s value brand, Boost, saw its revival right as the economy worsened, and CEO Dan Hesse found himself unable to sell it off or shut down Boost’s underlying iDEN network. Boost’s customer base decline from 4.2 million prepaid customers in September 2007 to fewer than 3 million just one year later. Boost closed out the third quarter of 2008 at 3.9 million customers. Neil Lindsay, vice president of marketing for Boost Mobile, emphasized the strength of Boost’s national network, available in 15,800 cities compared to Leap and MetroPCS’s limited albeit expanding reach. Specifically, Boost claims Cricket has more than four times the dropped calls than it does, while MetroPCS has two times as many.