DISH Bringing Changes to Prepaid Business

DISH Network acquired Boost Mobile at the start of July for $1.4 billion as a result of the T-Mobile/Sprint merger. A month later, the satellite TV provider gone wireless carrier, has learned quite a bit about the prepaid business with plans to change things up a bit. 

During DISH’s second-quarter earnings call on Friday, DISH Chairman Charlie Ergen said, “There are some of those customers that perhaps the way Sprint accounted for them … The way they ran that business wouldn’t make sense for us. We certainly have some cleaning up to do there.”

Boost Mobile recently launched two unlimited plans for under $50 and $60 a month, as well as five new limited plans nicknamed “5 under $50.” 

The postpaid market is more profitable, especially as an MVNO as noted by Ergen but also said that the prepaid business is “backwards” in comparison to how it’s done in other countries. Ergen said, “The United States is really the only country that I know of where the prepaid business actually is less expensive than the postpaid business.”

In the US, customers with no credit can get a nearly free or free phone, but postpaid customers with good credit are required to finance their phones. The idea is to sell products below cost, and make up for it in volume. This is a similar setup Ergen observed in other businesses like OTT or video

In the short time that DISH has owned Boost Mobile, they’ve brought back the popular $hrink-It! plan, 4 “limited data” options, and two unlimited plans. The $hrink-It! plan reduces the customers’ monthly rates by $5 for three consecutive on-time payments, with an additional $5 off for six on-time payments. Other new plans under the $50 price point include 1 GB of high-speed data for $10, 2 GB of high-speed data for $15, 5 GB of high-speed data for $25, and 10 GB of high-speed data for $35.

One of the stipulations of the merger between Sprint and T-Mobile was that DISH gets to use T-Mobile towers as they build out their 5G network. The MVNO deal likely requires DISH to pay T-Mobile by the GB of usage, so DISH does have an incentive to limit data for Boost Mobile subscribers. Jeff Moore, principal of Wave7 Research said this deal is great for DISH. 

In a world where most consumers want unlimited data, certain demographics want just enough to do basic browsing and downloading at a low price point- most notably older subscribers. The $20 price point is popular among prepaid carriers and though that’s not been Boost Mobile’s previous strategy, Moore said, “If they don’t market to older Americans, then I think they’re missing an opportunity.” 

There’s a huge opportunity for Boost Mobile because older folks don’t want or need a lot of data and tend to be price-conscious. Also, the $20 price point will be appealing to those who work from home all day and won’t need as much data for their phones. 

Now that Boost Mobile is owned by DISH, it’s getting a clearer idea of how it competes in the prepaid market. 

Now that Boost Mobile is under DISH, company execs are getting a clearer understanding of how they’ll compete in a prepaid market. Moore noted that there’s a segment of the US prepaid market where phones are subsidized and other segments where it is not. He also noted these as an urban prepaid competition where phones are subsidized and retail prepaid on a national scale where phones are not subsidized. 

Wave7 has noticed in recent years that service providers are trying to stop customers in the industry known as “round-trippers.” These are customers who frequently switch from one carrier to another to get free or discounted phones. 

Tom Cullen, DISH Executive VP of Corporate Development said that DISH doesn’t see the wireless business as just prepaid or postpaid and that there’s a huge wholesale opportunity for them. And with DISH’s spectrum holdings, the company can dominate that business. 

During the earnings call, Cullen said, “We’re going to have so much more capacity than we need for pre- and postpaid.” He also went on to say that there’s a ton of support from Washington D.C. for open radio access network (RAN) and for a US-based telco vendor ecosystem. Cullen praised the tremendous progress that DISH has seen the past few months around the ability to sell wholesale capacity, network slicing, and automation. 

Source: Fierce Wireless