Fixed prepaid services have failed to meet all of the objectives originally set out by operators, having failed to stimulate fixed line growth or to slow the explosive take-up of mobile services. Whilst they have proven relatively popular, this has been largely at the expense of the fixed post-paid subscriber base. However, they do have their merits. Not only has the introduction of fixed prepaid services led to a large reduction in bad debt (a particular problem facing fixed line operators in developing markets), but with careful pricing and packaging, they could act as an alternative to mobile in the future. Fixed line operators should weigh up the benefits and the costs of launching fixed prepaid services, before abandoning them altogether.

What operators must begin to do is to leverage the benefits of fixed line services over mobile. In practice this means bringing prices down (through improved efficiency) and promoting the superior quality and reliability of the service. Investment in bringing more affordable PCs to low GDP markets could also yield results, stimulating Internet growth, the protector of fixed line services in more developed markets. With fixed prepaid customers more likely to churn than their fixed post-paid counterparts, fixed prepaid providers should concentrate on boosting loyalty (as well as enticing customers to their services in the first place). Operators should take advantage of the fact that the lower marginal cost of a fixed voice minute (in comparison to mobile) is perfectly suited to the bundling of (a limited number of) free calls with the fixed prepaid subscription.

Table of contents

Key messages

Mostly a developing market trend

Failure to deliver on all of their objectives

Not a match for prepaid mobile

Still a valuable option


Fixed prepaid in context

Why fixed prepaid?

The line rental barrier

Credit management

The increasing popularity of prepaid mobile


Rationale for fixed prepaid

Has fixed prepaid delivered?

Failure to stimulate fixed line growth

Poor defence against mobile

Cannibalisation of the fixed post-paid subscriber base

Successful reduction of bad debt

Revenues: the importance of pricing


Is fixed prepaid a good idea?

Not a mobile substitute

The marginal cost of a new subscriber

Losing the customer relationship


Messages to service operators

Be careful with fixed prepaid

Not to be abandoned altogether

Price sensibly

Leverage the benefits of the fixed line

Continue with efficiency improvements

Boost customer loyalty


Case studies

Telkom SA

Telmex

Fastweb

Etisalat

PLDT