"Our retail prepaid is above market. We're really not competitive in that environment for a whole host of reasons and it's because we have to make sure that we don't migrate our high-quality postpaid base over to a prepaid product.
If you look at the competitive nature, they are doing it with sub brands. They are not really doing it with their brands. And quite honestly, we use the Tracfone brand as our prepaid product.
Tracfone has been extremely successful for us. It's not something that we disclose any more on reseller, but it continues to increase on the high-quality base of Tracfone, so that's really where we use and go after the prepaid market. More to come on this during the year, but currently that's how we
operate under the prepaid model"
In other words, Verizon is more worried about losing some of its "high quality" (translation: high paying) postpaid customers to cheaper prepaid than it is with losing overall market share. Reading between the lines Shammo seems to be saying that while prepaid is a better value for consumers, Verizon doesn't want to make that fact too obvious to its postpaid customers.
As for TracFone being Verizon's "prepaid product" and TracFone being "high quality", I don't know if Shammo is being serious or making a dry joke. As he points out, AT&T and T-Mobile are fighting for prepaid customers with their sub-brands Cricket and MetroPCS. So why isn't Verizon doing the same? TracFone is taking a cut of prepaid revenue that Verizon could keep to itself if it had a prepaid sub-brand on its own. Shammo does leave the door open to Verizon soon taking a different approach to prepaid, saying "More to come on this during the year, but currently that's how we operate under the prepaid model." I wonder if that means Verizon will launch a value priced prepaid sub-brand this year?
In most of the world, the majority of mobile users are on prepaid and the US market continues to move in that direction. For a long time Verizon has been able to command a premium price based on the breath and reliability of its network. But that era seems to be ending. T-Mobile's network is as good as Verizon's in urban areas and AT&T's network has caught up with Verizon's in both urban and rural markets. With its network advantage gone, how long can Verizon hold on as a premium priced provider that dismisses the prepaid side of the business?
Source: Verizon Investors Conference Call (PDF Transcript) via FierceWireless