Why Should AT&T offer a Prepaid iPhone?

Releasing a prepiad iPhone would create a great deal of new business.  The iPhone Prepaid business model works for network operators like AT&T, and as a result they do well on prepaid plans in multiple ways. Most obviously, when users fail to use minutes they've purchased, the operator does not have to refund the prepaid balance, therefore it goes straight to their bottom line as profit.  

 

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Less obviously but perhaps more importantly, prepaid rate plans enable carriers such as AT&T to improve their cash flow. This is because when a customer purchases a prepaid phone, or tops off their prepaid balance, the carrier is paid before they deliver the service.

Finally, offering prepaid plans allows operators to expand their customer base. Typically prepaid plans are most popular within the lucrative youth markets, and they also allow the carriers to serve credit-challenged customers and markets who might not otherwise be accepted for their traditional post-paid plans.

So to sum it up, here are the Top 5 reasons Apple and AT&T should release a pre-paid iPhone.

 

Top 5 reasons Apple and AT&T should release a pre-paid iPhone  

1. Sell more units, gain more customers.

Offering a pre-paid iPhone would broaden AT&T and Apple's market explore, and the larger a market, the more sales they'll receive. This is a win-win for both Apple (selling more iPhone devices) and AT&T (selling more minutes, taking customers away from the competition).

2. Improved cash flow.

As described above, when a customer purchases a prepaid phone, or tops off their prepaid balance, the carrier is paid before they deliver the service. While this usually won't be counted as profit until the service is used or expired, it does help the carrier by providing them with cash that they can use for other purposes, such as expenses or investments.

3. High Margin Prepaid market segment

When users purchase minutes and fail to spend them all, AT&T pockets the difference. This leads to a high margin business since the cost of sales are offset by the retained sales.

4. Increase sales for Add Ons, Content, and Accessories

Apple and AT&T both make a significant amount of money on service add ons, such as premium text messaging, faster data plans, mobile video; content, such as ringtones, full track music, applications, games and wallpapers; and accessories, such as skins, chargers, earbuds, and adapters for the iPhone. More phones in the market means more sales in these lucrative areas. And as anyone who's purchased an accessory knows, while the cost of the device may be discounted from the true cost of the device, accessories are usually the opposite-- meaning they are high-margin items.

5. Tap into Preapid Growth

The market for pre-paid celluar phone service is a high-growth area in the US, and the iPhone is a high-growth device. Combining the two could revolutionize the North American wireless service industry-- and help to advance it to something more similar with the profitable models that have been succeeding in Europe and other areas of the world.