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00-WDM Final for Web

W D M Since the onset of the financial crisis several years ago, prepaid wireless has gained in popularity and has rapidly become the fastest growing segment of the wireless marketplace. The combination of a maturing prepaid segment and increased M&A activity involving industry heavyweights does carry certain negative implications for existing market participants. For instance, regulatory scrutiny and enforcement of regulations, taxes and 911 fees by federal, state, and local regulatory and tax authorities is likely to increase. The entrance of large, well-established corporations such as AT&T (through Leap Wireless) and T-Mobile (through MetroPCS) marks a turning point in the prepaid wireless marketplace and a sure sign that the niche has matured into the “mainstream.” And when major service providers – all of whom are strapped with unavoidable regulator/tax burdens -- enter niche markets where regulatory/tax compliance may be spotty among the existing, smaller and more diverse participants, this activity shines a light on an area that may have been overlooked and ignored by the regulators. Companies like AT&T and T-Mobile will not sit quietly while their competitors are undercutting their prices through spotty compliance. Instead, these industry leaders are likely to wield their influence to persuade regulators to enforce the rules and regulations that are on the books. And as the regulators and tax auditors perk up, this increased enforcement activity will likely lead to increased compliance, increased costs, increased mergers & acquisitions of companies looking to get out before the liabilities rise to the surface, and so forth. In short, the entrance of major players into the prepaid niche will accelerate the pace of enforcement, compliance and consolidation. 92


00-WDM Final for Web
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