TracFone Wireless

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TracFone Wireless, Inc.
Type Subsidiary of América Móvil
(NYSE: AMX, BMV: AMX NASDAQ: AMOV)
Founded Topp Telecom, Inc., announces the company's name transition to TracFone Wireless, Inc on November 15, 2000
Headquarters Flag of the United StatesMiami, Florida, USA
Key people F.J. Pollak (President and CEO)
Industry Wireless Services
Products cdmaOne, GSM
Revenue ▲$1.4 billion USD (2007)[1]
Net income ▲$159 million USD (2007)[2]
Employees 400+ (2006)
Parent América Móvil (98.2%)
Others (1.8%)
Website www.tracfone.com

For the TracPhone by KVH Industries, see that company's article.

TracFone Wireless or TracFone is a mobile phone provider, subsidiary of América Móvil the largest Latin American mobile network operator; that provides prepaid mobile phone service in the United States, Puerto Rico and the United States Virgin Islands. TracFone is currently the sixth-largest mobile network operator and the largest mobile virtual network operator in the U.S. market with 9.895 million customers (as of March 2008).[3]

Contents

[edit] History

TracFone was established in 1996 as Topp Telecom Inc., a prepaid cell phone company, in Miami, Florida. In February 1999, Topp received a major infusion of capital from Telefonos de Mexico or Telmex (NYSE: TMX), Mexico's largest telephone company. TelMex paid $57.5 million for a 55 percent controlling interest in the company.

In 2000, Telmex spun off their mobile unit, creating América Móvil, of which Topp Telecom became a subsidiary. In November 2000, Topp Telecom Inc. changed its name to TracFone Wireless Inc. [4] The company has since grown into the prepaid leader of the United States.

[edit] Service

TracFone provides two brands of service: TracFone and Net10. The main difference is the logo and the prepaid minute rates and service options. Currently Net10 only offers GSM & CDMA services.

[edit] TracFone

The service allows a customer to buy airtime units to use on selected phones by Nokia, LG, Motorola, and Kyocera pursuant to a licensing agreement. TracFone sells digital cell phone models, although analog phones were once available. Depending on the region, TracFone service works on a GSM or a cdmaOne network. TracFone does not build its own wireless network but "resells" wireless service from more than 30 providers, as a mobile virtual network operator (MVNO). In the United States, TracFone operates on the AT&T, Verizon Wireless, Sprint, Claro and T-Mobile networks, among others (such as Alltel and US Cellular).

Since the last quarter of 2006, Tracfone had been upgrading the Analog and TDMA technology in order to only provide digital technology across the United States.[5] TracFone was due to complete the transition by February 18, 2008 when AT&T shuts down its TDMA service. Most of the customers are migrating into CDMA or GSM technology according the local area where the customer would be using the phone the most.

TracFone requires the customer to activate a cell phone before use. Activation consists of calling the TracFone hotline number or going to the TracFone website and entering programming codes directly into the phone or by using the OTA feature (through radio waves provided by the customer's local tower). The customer redeems units by entering a validation code into the phone or by using the OTA feature (Over the Air) on the prepaid menu, also known as the Redeem Airtime option. A single unit roughly equates to one minute of telephone airtime. Receiving SMS text messages is free on the Nokia 1100, 2600, and 3390 models and the Motorola V170 and C155 models but costs 0.3 units on the Motorola C139, C261, V176, and W370 models to open the received message. Sending SMS text messages typically cost 0.3 units on GSM models (0.3 units per page, where some models like the Nokia 1100 transmit only the first page while others like the Motorola W370 transmit multiple pages but charge more than 0.3 units per message). Sending or receiving SMS text messages costs 0.5 units on TDMA and CDMA models.[6] Certain older TracFone models also may implement a roaming charge, which charges 2 units per minute of conversation outside the caller's home region; most newer models no longer charge roaming.

To keep the service active, customers must avoid running out of airtime units (minutes) and days of service. These can be purchased in various combinations. For example, the $99.99 "1 Year Card" provides 400 minutes (June 2008), or the $139.99 1 Year + Double Minutes card is 800 minutes. Purchased airtime units are added to the previous balance and never expire. Purchased days of service are appended after the previous end of service date so that no days are lost by extending in advance of the due date. If a customer does not add airtime before the due date (displayed on the handset), the service, the TracFone phone number and any remaining units are lost. If service is reactivated within 60 days, the customer retains existing units on the handset.

[edit] Net10

Net10's service is similar to Tracfone's, save for airtime rates and a wider selection of phones to choose from. While most of the phone models available are also offered by Tracfone (like the Motorola C139 and C261), a few models (such as the Motorola W375 and LG C1500) are exclusive to Net10. All calls cost just 10 cents per minute. Text messages cost 5 cents each to send and receive.

[edit] International Long Distance

In keeping with its marketing to immigrant communities, Tracfone provides international calling options to all its customers. A toll-free number in the US is dialed to make phone calls to at least some telephones in over 50 countries. Generally this will not include mobile phones in 'caller-pays' countries. There is no additional charge to make international calls through this gateway, but the gateway only works from Tracfones (thus paid minutes are deducted).

The International Neighbors plan allows Tracfone customers to obtain up to three local telephone numbers in any of several Canadian or Mexican cities. These are forwarded to the Tracfone customer in the United States at the standard rates.

[edit] Customer service

In contrast to the popularity of the TracFone service, there have also been some complaints regarding TracFone's customer service practices. Example complaint reports can be found at Consumer Affairs regarding the quality of the product, the limitations of the service, and the business practices of the company.[7]

TracFone customer service is outsourced to several companies, mostly in Latin America; TracFone's customer care centers are located in:

TracFone's main goal is to perform a one-call resolution.

On February 9, 2007, a preliminary settlement in a class-action lawsuit against TracFone was approved in the Boone (County) Circuit Court in Kentucky.[8]

[edit] Handset bulk purchasing

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TracFone handsets are known to be purchased by resellers and unlocked, in order to be sold overseas. As TracFone subsidizes the handsets, and wish to reclaim their investment, they are known to have launched an extensive campaign against bulk resellers. Retailers have been instructed to sell only two phones as the Copyright Office have enacted an exemption for unlocking a phone if done "for the sole purpose of lawfully connecting to another wireless network." As the ultimate goal of unlocking the phone is to connect to another network, it is a possibility that the practice would be able to stand up if challenged in court; however, this has yet to happen. Another problem is that as the phones are being sold overseas, they can also be unlocked overseas, meaning the violation of the Digital Millennium Copyright Act (DMCA) is irrelevant.

[edit] Competitors

[edit] Notes and references

  1. ^ http://www.americamovil.com/docs/reportes/eng/2007_4.pdf
  2. ^ http://www.americamovil.com/docs/reportes/eng/2007_4.pdf
  3. ^ 1Q08
  4. ^ Miami company prepares prepaid cell-phone invasion - South Florida Business Journal:
  5. ^ TracFone Prepaid Wireless Service - TDMA & Analog Service Sunset
  6. ^ HowardForums: Your Mobile Phone Community & Resource - Text Rate Question
  7. ^ Consumer complaints about Tracfone
  8. ^ NKY.Com - This article is no longer available
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