Expanding Beyond Phone Cards to Get More Business

In this article, the second article in a long series of articles on the prepaid industry, we will be covering some alternative products that can be added to the traditional phone card business model. While most of these apply to the distribution business, some can also be applied to service provider model as well.

Prepaid Wireless:

Many traditional prepaid phone card providers like IDT, STI and Oblio have already entered into this market with the expectation that their existing distribution networks will take to the product the same way that they did with calling cards. At the beginning many of the phone card distributors all jumped on board and all signs pointed to big success. But unfortunately the consumer demand for prepaid mobile services in the US had yet to materialize making for some painfully slow sales. Add this to the fact that the distributors had to invest in expensive handsets upfront and were making far smaller margins than they were with calling cards, and you saw a quick decline in the distribution channels willingness to push this side of their business.

The good news is that market demand is finally rising, mostly due to the strong acceptance among the Latin American markets and a greater overall acceptance of prepaid services. There are also far less players today than in years past (no more ESPN mobile, AMP'd mobile and Disney Mobile) making for a less crowded and more profitable industry.

If you are willing to make a little bit of an upfront investment than this can be a lucrative product to add to your mix.

POSA:

Long time touted as the next big thing in prepaid, POSA has generated far more press than it ever generated sales. While I really don't want to get into the finer details of POSA, one thing worth mentioning is that if you can align yourself with the right partners and have the right connections to get into chain stores, this is a product than can help you increase your incremental revenues. To deploy the service you will require a fair amount of technical expertise but don't worry too much about this as most providers are usually more than happy to help in this area.

Also be very careful in this market as there are a lot of patent violation lawsuits on this technology currently being fought over in court. Research your providers and partners heavily to make sure they have the licences, patents and expertise before getting into this business.

International Mobile Phone Rentals:

This is fast becoming a big business here in the United States, with mobile phone rental agencies providing short and long term phones to students and business professionals traveling abroad. The demand for this product is created by the fact that most European countries work on the GSM network, a format not supported by too many US companies, making it almost impossible to use your existing phone outside of North America (some US companies like T-Mobile work on the GSM network but are far too expensive when used for making or receiving calls overseas).

The real challenge with this business is the distribution. In order to succeed you will need to either develop a partnership with a major retail chain like a Western Union or a partnership with travel agencies and even possibly some specific online entities (this last one you can do yourself if you have the e-business savvy).

International Mobile Phone Top-Up Cards:

I had never heard anything about this product until I walked into a Western Union one day and saw an advertisement on the wall to buy top up minutes for your friends and family in Mexico. While I am not sure about how the fulfilment process works (is it through POSA or IVR), it seems to make perfect sense as the Mexicans here are always sending money back home so why not top off their mobile phone minutes at the same time.

The major hurdle here at this point would be finding someone who provides this type of product here in the US. Nevertheless a very interesting product!

Honorary mention:

While the 4 products mentioned above are what I feel would fit the best into the prepaid phone card distribution channel there are a number of other products that can be considered as well like: prepaid gift cards, prepaid translation cards, prepaid Voip, and prepaid utility programs.