Prepaid mobile telephony has acquired increased popularity over the last few years due to a number of incentives given to consumers: It is generally considered to be a more affordable service than contract mobile phones, as prepaid packages do not charge a rental fee, which the subscriber has to pay every month (they do, however, tend to charge a one-off connection fee for the service). In addition, no credit check is required on the consumer side - although we can see that some governments now start to impose mandatory registration of prepaid subscribers, i.e. Singapore, and Malaysia (which is looking into this possibility), in an attempt to boost national security. This makes pay-as-you-go packages a flexible option and often a preferred gift idea to friends and relatives. Following on from this, consumers have the option to budget their mobile phone expenses in accordance with usage. On the other hand, call charges tend to be slightly higher than postpaid offerings. Therefore, the service suits primarily light to medium mobile phone users rather than those making large amounts of calls.

In Europe prepaid mobile phones have developed into a trend that has spread particularly amongst the young population. The number of prepaid subscribers is often much higher than that of postpaid ones as a proportion of the total customer base of many European operators. T-Mobile (UK) reported 13.04 million prepaid subscribers during the first quarter of 2005, while the number of its postpaid subscribers was only 3.08 million. In Portugal, Optimus, the first operator to launch prepaid services in the country, announced that 84.90% of its total number of subscribers were prepaid (March 2005). Furthermore, Italy has one of the highest prepaid penetration rates in Europe, and according to Vodafone's latest financial report (Q1 2005), 92% of the operator's customer base in the country consists of prepaid users.

The flexibility concept regularly associated with prepaid mobile phones is also enhanced by the fact that subscribers can recharge their account at their own convenience by selecting the method and top-up amount of their choice. However, there can be certain 'hidden' aspects, mainly regarding the actual amount of credit contained in the recharge cards and how quickly that would be spent, but also with regard to the validity period of the credit. Tarifica has researched a number of mobile operators and hereby discusses three of the most prominent examples of those aspects, which may lead to consumers overspending or cutting down on their prepaid account expenses depending on whether they are aware of the 'hidden' conditions in place.

As table 1 below illustrates, French operator Bouygues Telecom charges its 'Nomad Classique' prepaid subscribers a flat tariff of € 0.50 per minute for all national calls (to fixed and mobile numbers). The same type of calls on 'Avantage Flash' prepaid plan is half the price of 'Nomad Classique': € 0.25 per minute, even though the card denomination values remain the same. What the consumer might want to consider in this case is that the credit recharged by 'Avantage Flash' subscribers is valid for half the period of that on 'Nomad Classique'. In other words, 'Avantage Flash' subscribers toping-up their account, i.e. with € 10, may benefit from a cheaper call rate, but they would only have 8 days to use this credit, as opposed to 'Nomad Classique' subscribers, who would have 15 days. The credit is invalidated after the expiry of the validity period.

notes:
1. All prices above are expressed in € and include VAT (19.6%).

A similar picture can be observed on T-Mobile (UK), as the table below shows. The recharge cards available from the operator start at £ 5, whilst the maximum recharge amount is £ 50. This gives subscribers flexibility to top-up their account with the desired amount. However, it is worth noting that the higher the usage on a monthly basis, the lower the call rate applying. T-Mobile pay-as-you-go subscribers spending up to £ 10 worth of credit per month receive a flat call rate - for all national calls - of £ 0.30 per minute. However, those spending over £ 40 per month may enjoy a flat tariff of £ 0.05 per minute, on the condition that usage exceeds GBP 40 per month (on voice calls) for 3 consecutive months (table 2).

notes:
1. All prices above are expressed in £ and include VAT (17.5%).
2. Monthly usage must exceed £ 40 per month (on voice calls) for at least 3 consecutive months, in order for subscribers to be able to benefit from this call rate.

Tunisiana, the second mobile operator in Tunisia, recently launched 'Tunisiana Light', its electronic recharge method (as opposed to the conventional 'scratch cards'), which allows subscribers to electronically top-up their account with the desired amount at any retailer that has an agreement with the operator. As table 3 below shows, the flexibility to recharge one's account with credit as low as TND 1 comes with a price, as the validity period for this amount of credit is 1 day only.

notes:
1. All prices above are expressed in Tunisian Dinar (TND) and include VAT (18%).
2. Exchange rate: 1 US Dollar (USD) = 1.34979 Tunisian Dinar (TND) - Source: OANDA

Prepaid mobile telephony has until now been branded as an alternative to contract phones and has been targeted primarily at subscribers who wish to be in absolute control of their mobile phone expenditure. However, the examples above serve to illustrate that this may not always be the case, as a number of aspects, which prepaid subscribers would fail to consider, can actually have a significant impact on their expenditure pattern. It then goes down to the level of information that subscribers receive and whether they are fully aware of all the contractual conditions in place.

Another aspect to consider in this case is the various top-up options available for subscribers. As opposed to the conventional 'scratch card' only method of top-up available until recently, prepaid subscribers now have a variety of options to choose from: electronically via the operator's web site, by recharging the so-called 'recharge card' (works like a 'smart' card and can be used at a number of outlets, such as supermarkets, post-office, petrol stations, etc.) or over the telephone through customer care. It becomes evident that the plethora of top-up options available aims to facilitate the recharging process and enable subscribers to top-up their account on a greater number of occasions.

In short, it seems that there is a number of issues to consider regarding prepaid services and subscribers would need to fully explore their options and make themselves aware of the conditions applying before that can benefit from efficient management of their account.

TARIFICA is the world's leading specialists in telecommunications pricing and analysis, is a division of Access Intelligence LLC, an international niche services consultancy in the telecommunications industry, with offices in London, New York and Washington DC.

The company, which was established in 1976 as the first consultancy to track telecommunications tariffs, offers a unique repertoire of tariff related products covering fixed and mobile services in Europe, the Middle East, Africa, Indian subcontinent, Asia-Pacific and Latin America. Our multilingual specialist team, which collects data, is constantly updating more than 1 million tariffs from over 200 operators in 120 countries by primary research among the operators themselves.