Prepaid phone plans might soon see changes

Sprint, T-Mobile brands could be consolidated

If the government approves Sprint and T-Mobile’s bid to merge, customers of lower-cost prepaid plans — say, from Boost and MetroPCS — could see some changes.

Both Sprint and T-Mobile sell prepaid services at lower costs and under different brand names: Sprint has Boost and Virgin Mobile USA, and T-Mobile offers MetroPCS. The two also wholesale their networks to such third-party resellers as Consumer Cellular, Republic Wireless and Ting; AT&T and, in particular, Verizon are less open to the resellers.

These prepaid and resold services have allowed many customers to lower their bills by buying only the level of data they need; some also rank higher in customer-satisfaction surveys than these carriers’ own subscription services.

Weaving together Sprint and T-Mobile’s networks could upgrade those services, but the combined company could also choose to consolidate its own prepaid brands. Meanwhile, resellers — in trade jargon, MVNOs, short for mobile virtual network operators — that now offer service from both firms would find themselves tied to one.

Among Sprint and T-Mobile’s inhouse prepaid options, MetroPCS is by far the biggest player, says analyst Jeff Moore, principal at Wave7 Research. T-Mobile has 20.9 million prepaid users, most on MetroPCS, and Sprint has 9 million, most on Boost Mobile, he says.

In urban areas, Moore adds, the prepaid market is dominated by MetroPCS, Boost and AT&T’s Cricket Wireless prepaid brand.

“Boost Mobile and MetroPCS are easily the most competitive and aggressive of the three,” he says. Having the merged company close one of those brands would not help customers: “A union of MetroPCS and Boost Mobile would make the prepaid market in urban America far less competitive, leading to higher prices.”

The advocacy group Free Press pointed to the disproportionately high share of low-income customers among MetroPCS, Boost Mobile and Virgin Mobile USA as a key reason for the government to quash the deal.

But Moore says his current guess is that a combined firm would either retain both brands or cut Boost loose to appease regulators.

“Boost is smaller than MetroPCS and could easily be spun off to help secure merger approval,” he says.

Sprint and T-Mobile have not commented on plans for their prepaid services.