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Larger carriers losing prepaid phone sales to smaller players

Prepaid smartphone sales are on the rise, but smaller carriers are stealing sales away from the big boys, says NPD.

Lance Whitney Contributing Writer
Lance Whitney is a freelance technology writer and trainer and a former IT professional. He's written for Time, CNET, PCMag, and several other publications. He's the author of two tech books--one on Windows and another on LinkedIn.
Lance Whitney
2 min read

Top carriers such as Verizon, AT&T, and T-Mobile are losing sales of prepaid smartphones to the likes of Boost Mobile, Virgin Mobile, and MetroPCS, according to an NPD report out today.

Third-quarter prepaid smartphone sales for the smaller carriers rose 23 percent over the prior quarter. But sales among the tier-one carriers dropped by 12 percent over the same period. Why? The smaller players won over customers by offering lower prices and a larger selection of prepaid phones, NPD said.

In the third quarter, 70 percent of smartphone buyers who bought their phones through a prepaid carrier had switched from a tier-one carrier. Consumers replacing their mobile phones were more likely to switch from a tier-one carrier than were first-time smartphone buyers.

"Both AT&T and Verizon have introduced less-expensive prepaid offerings, and Verizon has expanded its prepaid smartphone lineup, but questions remain whether it's too little, too late," NPD Analyst Stephen Baker said in a statement."

Of all the smartphones sold in the third quarter, 42 percent were prepaid phones, NPD said. That's an increase from the second quarter, when 39 percent of all smartphones sold were prepaid ones.

A full 70 percent of all mobile phones sold last quarter were smartphones, according to the report, up from 66 percent in the prior quarter.

Much of that growth came from Android, which saw its share of the smartphone market rise to 63 percent from 59 percent in the second quarter. Apple's share stayed the same, at 31 percent.

In leading order, the top five smartphones sold last quarter were the iPhone 4S, the Samsung Galaxy S3, the iPhone 4, the iPhone 5, and the Galaxy S2, according to NPD.

"While the iPhone 5 helped Apple maintain market share, the iPhone 4S and iPhone 4 also drove a considerable amount of sales, among first-time smartphone buyers and also among older iPhone generation owners," Baker said. "With just about a week of sales to record in the third quarter, the iPhone 5 had a notable impact on the market, but by no means did older iPhone generations suffer, since carriers provided less-expensive pricing for those models."