The Problems with the Prepaid Mobile Market Pre and During the Pandemic

In our recent article, we talked about how big and important the prepaid mobile market plays socially and economically.

Today, we will be discussing the problems of the prepaid mobile market before and during the COVID-19.

Pre-COVID-19

Prepaid airtime is the most prevalent type of mobile connection in the world, it is also extremely fragmented. The market is ridden with problems that make airtime expensive and inconvenient.

Inefficient physical distribution and fraud can pad airtime prices up to 30%. Airtime is resold from mobile operators down to distributors and dealers, with each step charging 10–15% higher in commissions. Since airtime is often purchased in cash through top-up cards, an estimated US$180B is lost every year to fraud. As a result, mobile operators increase their prices to cover costs.

The Prepaid Airtime Distribution Pyramid

Present–during Covid-19

At the height of the COVID-19 pandemic in March 2020, over 100 countries had instituted lockdown measures. Billions of people were affected, being asked to stay home or limit movement. This has made shopping at brick-and-mortar stores less viable, affecting prepaid airtime which has traditionally been sold via physical top-up cards or face-to-face top-up retailers. Now more than ever, prepaid users are clamoring for an easy way to top up their phones from home.

There are also more prepaid mobile connections than there are subscribers, showing that prepaid users often own multiple SIM cards. Depending on their purchasing power or the person they are calling/texting, users switch cards and top-up only what they need. But since airtime is non-transferable, users have to buy specific airtime credits from each mobile operator — an inconvenient and expensive process. Churn is a major factor; consumers churn during low-balance periods, causing mobile operators to replace their customer base every two years.

All these problems cause billions of users to waste time, money, and effort just to get prepaid airtime.

Mobile operators are spending over US$670M replacing lost prepaid subscribers

Sources:
- (2020, April 7) Coronavirus: The world in lockdown in maps and charts
- Barton, James. (2019, February 13). Juvo and Strategy Analytics highlight prepaid churn in new report
- Bicheno, Scott. (2019, February 13). Prepaid market is an operator blind spot — research

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