Connecting with kids
ST. PAUL, Minn. — More than 150 million Americans tote a cell phone, and if you think that’s a lot, just wait. The wireless phone industry is now trying to sell prepaid phone service to teenagers, who once were dismissed as lousy customers.
Companies are even branding themselves with the younger generation in mind. Virgin Mobile, FreeUp, GoPhone and Boost Mobile are offering prepaid phones — where users pay for their minutes upfront instead of waiting for a bill — tied to popular musical artists or youth-oriented events like hip-hop concerts, surfing and skateboarding.
They know young people have no patience for long-winded explanations of the mind-numbing variations of cell phone plans, so they’re making these phones as easy to buy as grabbing a pair of cheap sunglasses off a rack.
“With Boost, they walk by, and bing, bang, bong, they’re done,” said Audrey Schaefer, spokeswoman for Nextel Communications, which formed Boost Mobile in a partnership with an Australian wireless company of the same name.
Unlike most cell phone plans, these services don’t require a credit check or lock a person into a contract for at least a year with regular monthly payments.
Instead, wireless companies have turned to their ugly stepchildren, prepaid phones, and given them Cinderella-style makeovers — if Cinderella watched a lot of MTV, gyrated to hip hop and sported tattoos.
With prepaid phones, customers don’t pay a monthly fee or sign up for a plan. They simply buy the phone, load it with minutes, usually in batches of $20 to $100, and start dialing. When the minutes run out, they buy more. Prepaid cards, often sold at convenience stores, let them buy the minutes and load them by entering a pin number. Increasingly, though, wireless companies are setting up online Web sites for customers to use with a credit card.
Old prepaid plans failed miserably, noted senior wireless industry analyst Adam Guy of the Yankee Group, a technology research firm based in Boston.
Carriers offered a limited selection of clunky, obsolete models, sold them full price and charged a lot per minute to boot. Newer prepaid plans, however, sell phones for under $50, and some offer the same top models costing as much as $200 as in their postpaid plans. A few feature exclusives, like Virgin’s MTV edition or Boost’s “Roxy” model, which is tied to the surf-lifestyle brand popular with some teen girls.
Per-minute prices have dropped to as low as 10 cents a minute under certain conditions, Guy said, and the ability to activate and pay for service online has cut fraud.
“Prepaid is no longer a dirty word,” he said.
New prepaid users could generate $6.3 billion in additional revenue to the total wireless market between 2003 and 2006 “if carriers are successful in implementing their prepaid offers to teenagers and poor-credit users,” according to researchers at Morgan Stanley Equity Research.
Some of the enthusiasm for prepaid includes underserved markets like immigrants, whose cultures may distrust credit. But targeting the youth market is particularly smart, Guy said.
“If you can win a customer market now, you’ve got a good time horizon, as opposed to the senior citizen market, which is equally underserved,” he said.
Adults who don’t make enough calls per month to justify a monthly cell plan are attracted to prepaid phones like Virgin Mobile — but hesitate.
“I was going to buy the same model as my son, but I felt kind of silly,” admitted 47-year-old Beth McMillan, who gave her 15-year-old a Virgin Mobile slider phone for his birthday.
“Boy, I’m too old,” she said.