Wireless carriers have always preferred post-paid customers who sign contracts for a year or two and face hefty cancellation fees if they jump ship. Pre-paid customers, who don’t care if they buy the latest smartphone technology, buy a cheaper phone and then load it with minutes as needed.

As a result, pre-paid revenues are harder for carries to predict, and churn rates are higher because pre-paid customers have no reason to stick with a carrier if a lower price is available elsewhere. The announcement that Sprint Nextel Inc. (NYSE: S) is teaming up with Wal-Mart Stores, Inc. (NYSE: WMT) to offer a new low-cost pre-paid plan could change that. Verizon Wireless, a joint venture of Verizon Communications, Inc. (NYSE: VZ) and Deutsche Telecom AG (NYSE: DT), rents space on its network to other pre-paid providers, the largest of which is America Movil S.A.B. de C.V.A. (NYSE: AMX), owned by Mexico’s Carlos Slim, with about 15.5 million customers for its TracFone Wireless service. AT&T (NYSE: T), with its exclusive deal on the iPhone from Apple, Inc. (NYSE: AAPL), does not pursue the pre-paid market very hard because it sees little profit there.

Earnings at two smaller pre-paid companies, Leap Wireless International, Inc. (NASDAQ: LEAP) and MetroPCS Communications, Inc. (NYSE: PCS) are expected to be either about flat with a year ago (PCS) or to be down (LEAP) due the competition from the big boys.

And the competition is stiff. Sprint’s deal with Wal-Mart lowers the per-minute rate to $0.07, about half the current TracFone rate. And that rate applies to text messages as well as calls, which is important because voice calls now account for less than half the traffic on mobile networks.

Contract phone plans that let customers roll-over unused minutes don’t attract new customers because most never use the minutes, instead piling up huge amounts with no intention of ever using them.

Where the big carriers are making money is with smartphones, but that too could begin to erode as both MetroPCS and Leap either already sell or plan to begin selling smartphones. The catch for these smaller carriers are that they can’t offer subsidies on the pricey phones. Still, many customers don’t care and are willing to pay for the phone instead of committing to long-term contracts.

Pre-paid customers are critical to the success of Leap, MetroPCS and TracFone. For Sprint and the other large carriers, these customers are helping to offset their lost contract customers. Pre-paid customers will never make up for those lost contracts though, only more smartphone customers will do that.

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