3 UK sweetens its prepaid offering

3 UK has announced that from 1 June 2009, all new and existing prepaid customers will get free texts based on the value of their top up (starting from 25 texts for £5). In addition, they will get 150 megabits of mobile data usage free with each top up. The texts and mobile data allowances have a 90 day lifetime.

Given the fact that prepaid customers make up a relatively low share of its customer base, and its low share of the UK prepaid market, 3 has very little to lose and everything to gain from this offer, according to research firm, IDC.

While it may seem crazy to be effectively encouraging customers to lower their spending (and thus intentionally eroding its own ARPU to an extent), 3 stands to gain in both customer volumes and retention. Its prepaid offers have previously suffered by comparison to those of the big four in the UK market, and this new deal should help shift the balance somewhat, IDC said.

IDC believes that this kind of initiative is the only way that operators will manage to get prepaid customers using the mobile internet. Without a large allowance or some other reassurance, consumers are too concerned about the potential cost to experiment with internet services. That being the case, 3 will need to ensure it communicates to customers exactly how far 150Mb will go, and it has already stated that it will send text warnings when consumers near the end of their credit.

The internet offering makes particular sense, given that 3 has traditionally avoided the low end of the prepaid device market, and thus many of its prepaid customers already have devices that are Internet-capable to some extent. With this and its recent Skype announcement, 3 has certainly been living up to its reputation as a disruptive player, and we await its competitors responses with interest.