US Economy Continues to Tank! What Will This Do To The Phone Card Business?

As we creep closer and closer to a full blown recession most analysts believe that consumer spending will decline significantly, hitting non essential goods providers the hardest. The question that I get asked frequently is how will this affect the prepaid phone card business?

Phone cards are not technically classified as an essential item, but at the same time they serve a need that does not disappear just because times are bad. The need to talk to your family and friends abroad is always there it just might happen less frequently as a result. So the customer who used to call his mother 7 times a week now might only call 2 or 3 times a week to keep his costs down.

The reduction in usage is not welcome news to an industry already on hard times but will just force those still left in this business to run more efficiently or be forced out! Mergers and banruptcies will become more common and a landscape of only a handful of players is likely to emerge. The bigger companies like IDT, Ibasis, STI, and Locus will probably survive, albeit smaller, and most of the mom an pop providers will disappear. Distribution will also change, with many of the independent distributors leaving and a new distribution group coming in to scrape up the auxiliary business (larger one stop convenience store distribution companies will pick up phone cards).

While this is just my opinion, I still think whatever the path this recession takes, the phone card business will emerge as an industry far different than we have known.