Telecom Sees Lift from Kindle and Other Alternative Sources

Telecom Sees Lift from Kindle and Other Alternative Sources

Roger Entner, SVP, Head of Research and Insights, Telecom Practice

With the telecom landscape in constant flux, carriers continue to find unique ways to add to their bottom lines. While the Kindle, Amazon’s wireless reading device , has been touted as a savior for the newspaper industry, it also represents the first example of the long-predicted ad hoc subscription model for Sprint, which provides the wireless access for Kindle as subsidized by Amazon. Sales of the Kindle drove a majority of Sprint’s 394,000 wholesale additions in Q1.

But because Kindle is included in Sprint’s overall subscriber numbers, the carrier will see pressure on its average revenue per user (ARPU) numbers going forward if ad hoc subscriptions become a significant business. We estimate that Kindle may only represent $2 ARPU compared to approximately $56 for a postpaid Sprint subscriber, however.

Another alternative model is the state-sponsored Lifeline Services available through TracFone. These Lifeline Services enable low-income Americans to receive free wireless service with 40 to 80 minutes of use per month, depending on their state of residence, and this model is rapidly becoming a source of growth for TracFone.

The increase in prepaid subscriber share in Q1 is a trend we see continuing well into the second quarter. With the average consumer more concerned with budgets and bottom lines, it only follows that the disruptive unlimited players will continue gaining ground against the traditional carriers across many US markets.

Read additional Telecom insights in Nielsen’s U.S. Telecom Quarterly.