Thread by @trengriffin

1/ Tracfone was able to prosper in a world where so many US MVNOs failed because: (1) it has unique distribution in a hard to reach part of the market; and (2) it played multiple network suppliers off each other to make a wholesale transfer price workable. google.com/amp/s/www.cnbc…

2/ Verizon is already the network provider for 13 of 21 million Tracfone customers.

Revenues from Tracfone decreased 8.3% year but ARPU rose 2.4% year over year to $24, while the churn rate was 4.6%. Prepaid for value customers is a hard business with low CAC a critical factor.

3/ For reseller like Tracfone with $24 ARPU and 4.6% churn a month, you can solve for what the combination of gross margin and CAC must be to produce an acceptable financial return. Getting sales with a Tracfone on a hook at a drugstore or small grocery is part of low CAC.

4/ The prepaid cellular business was invented because large numbers of potential wireless customers couldn't pass a credit check. The original postpaid wireless business involved an up front subsidy and a credit card like device and that approach didn't work in value markets.

5/ Why did Verizon buy the 21 million prepaid subscribers for $7 billion or ~ $333 a pre-paid subscriber? Certainly getting control of that many customers is defensive. Increasing ARPU is playing offense. Whether it makes sense depends on how the unit economics change.