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MetroPCS Joins the Crowd in San Diego

MetroPCS recently brought its flat-rate, no-contract wireless phone service to San Diego and 14 other markets nationwide, taking on locally based Leap Wireless.

While San Diego presents a crowded field, MetroPCS is chasing the fastest-growing segment of the U.S. wireless market.

Strategy Analytics forecasts that from 2012 to 2016, carriers such as MetroPCS — selling prepaid, flat-rate, no-contract, monthly plans — will experience a compound annual growth rate of 10.7 percent. That compares with 3.3 percent for postpaid services and 4.6 percent for what Strategy Analytics calls classic prepaid services.

Prepaid service appeals to “value conscious” customers who don’t want to be tied to two-year plans, such as Latinos, 18- to 25-year-olds and families looking to economize, said Susan Welsh de Grimaldo of Strategy Analytics.

Those populations are well-represented in San Diego.

“The opportunity was clear in San Diego for a value product and service like ours,” said Steve Gerevas, MetroPCS’ vice president and general manager for Southern California. MetroPCS offers a service marketed as “$40, period” for unlimited data, talk and text. It offers service on a 4G LTE network.

T-Mobile-enabled

Of course, a local company serves the value-conscious market. Leap Wireless, a Qualcomm Inc. (Nasdaq: QCOM) spinoff, sells its service under the name Cricket.

One analyst wonders whether MetroPCS can expect some spirited competition as it enters a similar carrier’s turf.

“San Diego wouldn’t be on my short list” if he was in MetroPCS’ position, said Gerard Hallaren of Janco Partners in suburban Denver. Carriers tend to be very strong in their hometowns, he said.

Nevertheless, both carriers are backed by strong companies.

On May 1, Deutsche Telekom’s T-Mobile USA Inc. (NYSE: TMUS) announced it had completed its acquisition of MetroPCS. The move enabled MetroPCS to use T-Mobile’s spectrum, including the T-Mobile airwaves in San Diego.

In mid-July, AT&T Inc. (NYSE: T) announced plans to buy Leap Wireless for $4 billion, including the assumption of $2.8 billion in Leap Wireless debt. At least three federal agencies must approve the acquisition, a process that could take six to nine months, Leap Wireless spokesman Greg Lund said. Until then, it will be “business as usual,” he said.

Multimedia Marketing Planned

MetroPCS has more than 50 San Diego-area resellers and expects to have 100 soon, Gerevas said.

One area reseller, Tony Drassiou, said he has activated 80 MetroPCS plans since late July. Drassiou owns SomeGuys Wireless in Normal Heights and San Marcos.

MetroPCS has no corporate-owned stores in San Diego, Gerevas said, “but that could change.” The business has been in the Los Angeles market for seven years and has corporate stores there.

The executive said MetroPCS plans an advertising campaign taking in television, radio, outdoor and transit. “Very soon you will see us in a number of media,” he said.

In addition to San Diego, T-Mobile rolled out MetroPCS service in Fresno.

Other new markets are Baltimore; Birmingham, Ala.; Cleveland, Akron, Toledo and Sandusky, Ohio; Houston, San Antonio, Austin and Corpus Christi, Texas, and that state’s Rio Grande Valley; Memphis, Tenn.; New Orleans; Seattle and Tacoma, Wash.; Tallahassee, Fla.; and Washington, D.C.

And T-Mobile could have designs on other new MetroPCS markets, according to published reports.

Twenty-five percent of wireless phone customers use prepaid services, said Hallaren, the Colorado analyst, though only 15 percent of wireless phone revenue comes from the prepaid sector.

Overall, wireless growth has been sluggish. Prepaid service revenue grew 2.8 percent year-over-year, Hallaren said, while postpaid revenue grew 1.5 percent.

The analyst said prepaid carriers are very good at targeting consumer markets. For example, Locus Telecommunications Inc., a subsidiary of Japan-based KDDI, markets its H2O Wireless service to people who want to call Mexico and other international locations. Arterra Mobility offers its Kajeet wireless service with parental controls to parents of school-age children.

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