We live in a unique cell phone bubble in North America: We are the only region in the world where the majority of people get their cell phone service with a subscription. Here, prepaid phones are a fringe minority, relegated to lower-income populations, very infrequent users, and loaner phones. But in the rest of the world, prepaid phones vastly outnumber subscriptions, in some cases by 5-10x.
A recent article by Asymco makes this very clear. Here’s the overall breakdown globally (“post-paid” = subscription since you pay after each month’s service):
The breakdown by region:
However, smartphones have so far been largely limited to subscription plans. As Asymco notes (using the iPhone as an example):
The first chart shows the global split between pre-/post-paid subscribers as of 2010. Roughly 1.5 billion are post-paid and 3.7 billion are pre-paid. That means that nearly 70% of the world is not being addressed by the iPhone as it currently stands. Put another way, a shift in positioning might result in a 250% increase in addressable market…. You can visualize the iPhone having spent the last four years penetrating into the blue areas of the chart through the expansion of carrier agreements. With half the US & Canada area being finally filled in this year, most of the blue is now more-or-less within reach.
Furthermore, according Nielsen, the subscription market has shifted dramatically to smartphones in the US, with 38% of Americans owning them, and 55% of purchases in the last 3 months being smartphones. If this trends takes hold in other markets beyond their relatively small subscription customers, then smartphones will really take off in a whole new way with prepaid users.
One Step Ahead
Now consider this: in the next version of iOS, an iPhone (or iPad) won’t need to every be tethered to a PC. If expectations hold up, this means that an iPhone user won’t need to own a PC at all. Guess what? This matches up perfectly with the prepaid market in the rest of the world, where PC-ownership is far, far lower on average than it is in the US. The iPhone therefore can become the defacto communications/computing device for a vast population. Apple has already made a small move in this direction by making the iPhone 4 available unlocked, but in the US this is largely pointless since 3G bandwidth is only available on AT&T’s network (the iPhone’s 3G radio is incompatible with T-Mobile’s network, the only other choice). But it’s clear Apple has its eye squarely on this next huge frontier of growth, one that could easily dwarf the impressive volumes it’s achieved so far.