Prepaid calling cards have been available to North American consumers since 1986. This is currently a mature market with numerous contenders. Despite various challenges the industry faces, the prepaid calling cards market is growing. Additional features and benefits such as Internet accounts, digital information and entertainment services and debit and payroll cards are now getting included in calling cards, which further enhance the overall value to consumers.
New analysis from Frost & Sullivan North American Prepaid Calling Card Markets, reveals that revenues in this industry totaled $3.20 billion in 2005 and expects to reach $2.14 billion in 2012.
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“Increase in immigrant population and their growing prepaid needs will continue to fuel market growth,” explains Frost & Sullivan Research Analyst Abhishek Murali. “As providers are beginning to offer more ‘clean’ cards through POSA terminals, calling cards are expected to become popular with many end users.”
With the constant rise in immigrant population across North America, service providers are looking at expanding their product portfolio in order to cater to the prepaid needs of customers. The number of international travelers to North America has also been steadily growing and this expects to act as a major boost to the calling cards market. Leisure travelers make up a large portion of the international visitors, with the rest comprising of business travelers. Due to impermanence of stay, the calling card proves to be the best option for these visitors to stay in touch with family and friends.
The low usage cost offered by the prepaid service is the most attractive feature for the consumer. A 'clean' card with no hidden surcharges or fees has improved customer growth. Conversely, this reduction in cost and the removal of additional charges have also led to difficulties in maintaining profit margins by the service providers. In addition, the emergence of 'fly by night' competitors has led to increased price competition. This results in reduced profits for long-standing service providers, as they try to compete with such low-price offerings.
“Prepaid wireless expects to continue to be the most attractive option among consumers,” notes Murali. “Pricing and convenience of wireless has fueled growth, and enabled the U.S. prepaid wireless subscriber base to attain 150 percent growth from 2002. This growth rate expects to continue over the long term, thereby shrinking the demand for calling cards, especially in the domestic segment. However, due to high per minute rates for international calling on wireless plans, consumers will tend to use prepaid calling cards to make international calls using wireless phones.”
This market is at the mature stage of the industry life cycle. Though there is a lack of financial attractiveness, there is also immense potential for service providers to diversify into other related product categories. Service providers need to focus on niche segments and building a strong brand identity. Their established brand image will provide opportunities for providers to diversify into other related product categories that are growing at present and expect greater demand in future. Decline in overall revenues is due to reducing prices, whereas demand for calling cards exist and will continue to exist thereby providing room for service providers to diversify into related product categories for revenue maximization.
North American Prepaid Calling Card Markets is part of the Communications Services subscription and it evaluates the different segments of the prepaid calling cards market discussed in this study. In addition to in-depth analysis on the domestic and international prepaid calling cards segments, this study also includes identification of demand drivers and restraints for prepaid calling cards, along with the key challenges faced by various stakeholders in the market. Interviews with the press are available.
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North American Prepaid Calling Card Markets