Hard data can be hard to find. However looking through recent data relating to several mature operators in Europe we’ve noticed some significant trends. One such trend is that a number of mature operators have for some time been essentially sacrificing their prepaid subscribers in an overwhelming effort to increase postpaid subscribers. It is often communicated subtly in annual reports a bit like euphemisms at a funeral. It is described as as a “greater focus on the lower churn postpaid segment” or “higher proportion of quad-play”. In some cases, dramatic falloff of prepaid is dismissed as “prepaid base erosion”, “competitive pressures in the prepaid segment” or more positively as “ARPU increase”. [If you lose your lower value customer base of course the average value increases].

If you read a little deeper into statistics you’ll often find that numbers of prepaid users lost is not nearly equal to the number of postpaid subscribers gained. More significantly, postpaid revenue often hasn’t compensated for loss of prepaid revenue. In reality, increases in postpaid users may be a result of churn from other networks that might have occurred anyway.

There is rarely any further breakdown of prepaid user loss than this. It is as though all prepaid users are the same. There is acceptance of the inevitability of these lost users and hope that some will migrate to become postpaid users.

There are a number of points worth mentioning within this trend that have deep implications for Operators:

1. A Need for Better Definitions:

It’s too easy to dismiss lost prepaid users as “probably Millennials”, or worse, “Snowflakes” implying that this group of (probably 17 to 34 year olds) are all the same. Speaking as someone well past their “Millennial Snowflake” best, this narrative (not in company reports of course) is pretty offensive in its lack of recognition of diversity not to mention opportunity that this group holds.

[This writer recalls a number of conversations with operator personnel a few years back at the start of this trend when prepaid users were dismissed as “impossible to know who they really are” or “better to leave them to the bottom-feeders in the market such as low-cost MVNOs”, followed by: “they might even end up with our own MVNO partners”].

2. Opportunity Lost:

Perhaps more unsettling is the missed opportunity implicit in this trend and the long term loss of value in the search for increased average value in the short term. There can be enormous cost of acquisition or migration of users to postpaid / quad-play. Within the diverse group of prepaid users however are everything from typically uncommitted tourists to business people testing alternatives and everything in between. One operator we know works on the assumption that 20% of its subscriber base moves home in any year (hence a preference of staying with the flexibility of prepaid). Some prepaid users are tomorrow’s big spenders. Some are early adopters searching for disruptive alternatives. At the very least they all represent plain old revenue opportunity.

3. Short Term Gain, Longer Term Impact on Brand:

Brand damage can easily be done within other segments by not squarely addressing youth / occasional user segments. Brands can quite suddenly become highlighted by analysts as “irrelevant” to large segments with resulting loss of company value. The ultimate result could be a tipping point or a flood-out effect from advertising revenue streams and proximate segments. Tech markets become redefined rapidly and resulting brand damage can be catastrophic. Think of Nokia in the late 2000’s.

4. I Wanna Be Like You:

If this was one operator in a particular market it might be less concerning but in several markets we have looked at, we’ve noticed that more than one operator has more or less “dropped out” of the prepaid segment over the past few years. Perhaps this is based on market factors such as a natural trend amongst consumers but on the surface it could be the effects of sameness in terms of one competitor acting the same way as another. This trend towards sameness itself might be creating an increased likelihood of disruption.

Perhaps this has been a deliberate means by which to boost profits per subscriber in the short term and refocus for the longer term. It might however also mean that a more nuanced approach to redefining more personalized relationships with a wider range of users now provides a more powerful opportunity than ever, at least for some operators. For some this may mean breaking down silos of data that already exist in their organisations. For others it is likely to mean building increased flexibility to offer a wider range of services more rapidly for more powerful engagement of a wider range of segments. “Snowflakes” in all their forms should be welcomed.

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