More Consumers Shifting to Prepaid Smartphones

In the first quarter (Q1) of 2013, year-​over-​year total smartphone sales increased 42%, with one-​third (36%) of the actual unit volume increase represented by prepaid smartphone sales, according to The NPD Group. SmartPhone Carrier

Year-​over-​year prepaid smartphone unit sales doubled in Q1 and accounted for 32% of total smartphone unit sales, which is an 11 point increase year-​over-​year and a 10 point sequential increase from the record-​high share of 22% reached in Q4 2012. Postpaid smartphone unit sales grew just 23%, between Q1 2012 and Q1 2013.

In a quarter without a major product launch from either of the two market leaders, consumers refocused their attention away from the postpaid wars and toward finding the best value for their dollar,” said Stephen Baker, vice president of industry analysis at NPD. “Sales of prepaid smartphones doubled from the previous year, continuing a string of more than 12 quarters of triple-​digit sales increases.”

Based on the latest information from NPD’s "Mobile Phone Track," while Samsung’s share of prepaid smartphones remained stable between Q4 2012 and Q1 2013, the company has noted some market erosion compared to the prior year. Both LG and Apple made significant inroads into the segment since Q1 2012, with LG’s unit share doubling and Apple’s unit share increasing fourfold.

For consumers looking at prepaid phones today, value does not equate with finding phones that are cheap or obsolete,” Baker said. “In fact, the Galaxy S2 and the iPhone 4S, two of the top five prepaid smartphone models in 2013, were among the top-​selling phones overall just one year earlier.”

Sales of the top five prepaid smartphone brands comprised more than 80% of all prepaid smartphone sales, which is an increase of 5 percentage points over Q1 2012. National retailers were the dominant retail channel for prepaid smartphone purchases, and their sales-​volume share has risen almost 40% in the past year.

Prepaid has proven to be a real winner for national retailers,” said Baker. “The easy purchase cycle and grab-​and-​go nature of the product play into the strength of large-​format stores.  Certainly, companies like AT&T recognize this shift in purchasing as they ramp up their focus on prepaid phones with their recently announced ‘Aio’ product branding initiative.”

[Source:  "Mobile Phone Track, 2013."  The NPD Group.  15 May 2013.  Web.  16 May 2013.]