LatAM Wireline Operators Turn To Prepay To Fight Bad Debt.

The rate of unpaid phone bills in Latin America has been steadily climbing over the last few years, recently reaching extremes like 10% of net operator income in Argentina, and 15% in Chile. While several factors contribute to the increase in bad debt, the economic recession has had the most aggressive impact by far. In response, operators throughout the region are launching new products like prepaid, control line, and hybrid solutions to help customers control their spending levels, and to ensure that debts are paid.

While some operators have offered these products for a few years, the bulk of Latin American wireline operators have only recently begun to learn the lessons from their wireless colleagues: prepaid services reduce bad debt, maintain growth rates, and increase penetration. The main drawback of prepaid lines is the risk of cannibalizing traditional, postpaid, business, but operators have now have no choice. “To minimize cannibalization, operators have traditionally used prepay only as a last resort, with zero promotion. To maximize the efficiency of prepaid services, operators must approach it as a billing option for particular niche markets: second lines for children, frequent travelers, homes with extended family or quests, students, etc. Just because a subscriber wants to control costs, he should not be treated as a low credit, low worth customer,” states Erica Eppinger, Research Director, Latin America. These solutions, in conjunction with low/no interest payment plans, debt forgiveness, mileage/points programs, and other options form the tool set that can help operators get bad debt under control, with the added benefit of increasing customer loyalty and preventing churn.