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Target Takes Aim at Wal-Mart with Prepaid Mobile

Target Takes Aim at Wal-Mart with Prepaid Mobile
October 3, 2013 11:21AM

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Wal-Mart entered the prepaid wireless retail market in 2009. And it's unclear why Target took so long to join the party. However, although the market is growing, there are no guarantees the retail giant will gain market share in this space. Whether this will be successful or not, we have to see, said wireless analyst Jeff Kagan.

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Retailing giant Target is finally getting in on the prepaid mobile action. The company is calling its service Brightspot and it will run on T-Mobile's network and offer unlimited talk and text.

Debuting Oct. 6, Brightspot will go head to head with Wal-Mart's Straight Talk prepaid mobile service. Brightspot will offer up to 1GB of 4G data for $50 a month. The service also has a talk-and-text-only option without Internet access for $35 a month.

"Select your desired device from a robust selection of phones "from a simple flip phone to more advanced models," Target said in its marketing materials. "Want to keep your existing phone? No problem! Pick up a SIM kit, which will allow you to get Brightspot service on nearly all compatible, unlocked phones."

A Growing Market

We asked Jeff Kagan, a telecom industry analyst, for his thoughts on Target entering the prepaid mobile space. He told us the decision comes down to one simple word: opportunity.

"The telecommunications industry has been growing and changing dramatically over the last few decades," Kagan said. "Prepaid mobile has always been popular in the space."

Indeed, prepaid wireless revenues are set to cross the $25 billion mark by 2015, according to Atlantic-ACM, a strategic consulting and research services firm. Fedor Smith, an analyst at Atlantic-ACM, said pricing is at the heart of this growth, with the most aggressively priced plans for unlimited prepaid falling from $70 per month in 2008 to $25 per month today.

"The appeal of lower rates, particularly when paired with full-feature smartphones, drew many former postpaid customers over to prepaid services," he said. "The success of these offerings has not gone unnoticed by the major carriers."

Will Target Win?

AT&T has certainly noticed. After a failed attempt at acquiring T-Mobile -- and in the face of industry consolidation -- the carrier cut a deal to snap up prepaid wireless provider Leap Wireless in July. AT&T is willing to hand over $15 million per share in cash and will compete with the Cricket brand.

For its part, Wal-Mart entered the prepaid wireless retail market in 2009. Kagan isn't sure why Target took so long to join the party. Although the market is growing, there are no guarantees the retailer will gain market share in this space.

"Whether this will be successful or not, we have to see. However this is a natural step for Target in certain markets in certain stores," he said. "Target continually looks for ways to diversify. This makes sense from that perspective."

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