Virgin lowers rates as prepaid competition heats up

Virgin Mobile today reduced its $80 all-you-can-eat calling plan to $50 and added unlimited night and weekend minutes to its lower-cost plans. Sprint's mobile virtual network operator (MVNO) also introduced the ‘Pink Slip Protection' program, in which it will pay a customer's cell-phone bill for up to three months if that person loses his or her job. The carrier is responding to increased competition amongst regional players as its rivals continue to out-innovate the tier-one carriers and MetroPCS reports its best quarter yet.

MetroPCS, which specializes in local calling plans, said this week that it added 684,000 subscribers in the first quarter of the year, up 51% from the first quarter of 2008. Its total subscriber base is now 6.1 million. While churn was 5% in the first quarter, up 1% year-over-year, Metro's net customer additions surpassed the prior quarter's record by 32%. Like fellow regional CDMA player and roaming partner Leap Wireless, Metro offers unlimited prepaid plans ranging from $35 to $50 per month. Boost Mobile, Sprint's other value brand, also recently introduced an unlimited plan with no hidden fees for $50, followed shortly after by T-Mobile, which is trialing $50 unlimited plans for its existing customers.

The tier-two market is clearly the most exciting segment of wireless today, according to Whitey Bluestein, founder of strategic advisory firm Bluestein & Associates. These carriers are expanding and experimenting more than their larger peers, and it's showing in their results. The value providers are slicing and dicing plans, features and services to find new subscribers anywhere they can, he said.

"All the excitement, growth and innovation on plans is all coming from the so-called prepaid or hybrid market," Bluestein said. "You can pay twice as much to sign a long-term contract and have a better choice of handsets and a little better roaming possibilities, but I think for a lot of people who are looking at expenses, especially in this economy, [prepaid] will be an increasingly compelling proposition. There will be a lot of continued growth in this space in the market, and I think it will increasingly put pressure on the big guys to play in this space."

Leap and Metro have been encroaching on the national carriers for some time now, attracting landline cutters and a growing segment of cost-conscious consumers who rarely travel. Metro recently completed its Northeast push by expanding into two of the largest US markets, New York and Boston, with CDMA networks built by Alcatel-Lucent in early February, following a launch in Philadelphia last summer. It now provides unlimited service in nine of the top 12 markets in the US and services beginning at $45 per month in 92 of the top 10 markets. Leap's Cricket Communications service had nearly 4 million customers at the end of 2008 and is forecasting customer additions exceeding 1.5 million this year.