BOSTON -- January 23, 2003

The U.S. prepaid calling card industry will grow at a 9.7 percent compound annual growth rate (CAGR) to reach $6.4 billion by 2008, according to Prepaid Calling Cards: Market Dynamics and Forecast 2003-2008, a new report by leading telecommunications industry research firm ATLANTIC-ACM.

“While the prepaid industry is maturing and cannot maintain the blistering 25.4 percent compounded annual growth rate we witnessed from 1995 to 2002, the industry will continue to experience solid growth over the next five years as the $3.7 billion market expands by another 73 percent,” said Imke Louis Mensah, ATLANTIC-ACM vice president and analyst covering the prepaid industry.

Lower wholesale costs, coupled with packet technology improvements, are driving industry competitiveness. Industry growth is being fueled by simultaneous increases in the number of prepaid calling card users and diversification of service providers into other prepaid services. “Providers are aggressively targeting user segments – cash-based, students, ethnic groups, etc. – and expanding their offerings to drive revenue growth,” said Mensah.

Other key findings include:

• Gross margins for service providers have stabilized, with nearly 44 percent of providers achieving gross margins (on sales) of 25 percent or higher.
• Retail breakage – the amount of unused time on a prepaid card when it expires or is discarded – has declined from 12 percent, on average, in 1998 to 10 percent in 2002.
• Seventy-four percent of service providers expect to add point-of-sale (POS) activation features by 2005.
• Sixty-nine percent of service providers expect to include foreign language options on their prepaid card offerings by 2005.