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Vesta stops selling phone cards, starts sewing telecom giants
What do you do when your suppliers start competing with you and your profit margins shrink? You change your company's business model.
That's what happened to Vesta Corp. a couple of years ago. The company, at the time known as Carrier Services Inc., had made a niche for itself by creating a number of prepaid calling cards, many linked to frequent-flier programs. The concept was popular--perhaps too popular. As prepaid cards caught on, so did the phone companies.
Where phone companies had been content to let Carrier Services buy minutes and sell them in the form of "stored value"--that is, the prepaid cards--the carriers themselves began to see the value of selling phone time in that form. With the increased competition came its inevitable result--falling prices for phone time and increasingly narrow margins. Where customers paid 42 cents per prepaid minute in 1996, phone time on Sprint cards sells for a tenth of that today at Costco.
With minutes becoming a commodity, "some prepaid phone …