MVNO #3: 7-Eleven

In response to a J.D. Power & Associates survey saying “ … Consumers said the product they have the most problems with is their cell phone service,” 7-Eleven took it upon themselves to find a solution to the countless cell phone woes.  With seven years of experience selling prepaid phone cards, creator Kevin Cooper, 7-Eleven Category Manager for Prepaid Services, set out to search the market for a suitable plan to fit the consumers need of a quality and cool cell phone that offers a simple rate plan with easy sign-up.  Little did he know that he would end up having to create one of his own.  After exhausting all of 7-Eleven’s prepaid phone service suppliers, Cooper collaborated with upstart telecom consulting firm Ztar to find a solution.  Together, with the help of Cingular’s nationwide network and Nokia brand handsets, they created the 7-Eleven Speak Out prepaid cellular phone service.

After a highly successful “proof of technology” test in the Fort Worth, TX area in November and December of 2003 followed by a larger pilot in Dallas-Fort Worth region, Speak Out will be available at 7-Eleven stores in fourteen markets across the nation starting April of 2004.  Complete nationwide distribution and service is expected to be available by the end of summer 2004.

Currently there are only two phones available, both of which are provided by Nokia: the black and white Nokia 2260 and the color Nokia 3560.  There are no additional features offered by 7-eleven, such as an official website to download games, ringtones or graphics.  However, SMS messaging is featured on both phones to and from any carrier.  It seems as though they are hesitant to release extra features because the program is still in its infancy.  Also, Cooper’s original intent was to keep the plan as simple as possible to make purchase and use simpler than their competitors.  Available phone features are listed below:

With Speak Out, there are no strings attached when buying these phones.  7-Eleven truly provides an acceptable ‘phone-in-a-box’ for the budget conscious, credit challenged or people tired of complicated cell phone policies.  The new service provides a cheap, one stop, no hassle means of attaining cell phone service that can be used right after purchasing.  The phone comes with the battery already charged and a preset phone number.  Along with $10 of airtime pre-loaded, customers can immediately start talking once they insert the battery and turn on the phone.

Currently, there is no information provided by 7-Eleven about revenues, number of users, employee number, churn, etc.  However, I learned from confidential data that in the original Fort Worth pilot, 70 phones were sold from the available 65 stores in the November-December testing period; about half being 2260s and half 3560s.  At a price of $100 and $140 respectively, the ARPU is would have been $120.  They considered this a great success and continued to expand the program.

I can personally see this product succeeding brilliantly once nationwide rollout is complete.  There is no plan, the phones are ready to use, and everything is anonymous.  There isn’t anything to be confused about other than which phone better suits you.  It’s a flat 20 cents a minute anytime, and there are no regions, so the phones can be used anywhere in the network.  Additional features could be added easily since the phones already support these features.  All they need to do is create an official site for downloading games, ringtones and graphics.  They can just wait for the results from Boost to see if application and ringtone downloads are popular then mimic their system to a degree they deem fit.