Why Sprint Can't Win With Its New Subscriber Plan

Telecom & Wireless

Published: August 18, 2015 6:37 am

Sprint (NYSE: S) launched a new, revolutionary plan to add and keep subscribers. The only flaw is that AT&T (NYSE: T) and Verizon (NYSE: VZ) can match the plan in a moment, if their managements believe Sprint’s plan has started to rob their customers.

The plan is simple enough, although complicated enough so that some of those eligible will need an explanation:

Starting today (August 17), new and upgrade eligible Sprint customers can get iPhone for just $22 per month with iPhone Forever. Anytime customers don’t have the latest iPhone, they are eligible to upgrade. They bring their iPhone, upgrade on the spot and away they go. It’s that simple. iPhone Forever is available on any eligible Sprint rate plan and upgrade eligibility is always included in your price

The rules start to narrow right away. The Apple (NASDAQ: AAPL) iPhone can only be a 16GB model.

And, the restrictions make the offer even less attractive:

Three Key Steps

1. Get a 16GB iPhone 6 model for $22 (or the $15 special promotional price with trade-in) when you activate on any individual unlimited plan or family share pack plan.

2. Upgrade to the latest iPhone by the end of the year and keep the $15 a month special promotion price.

3. At your next upgrade, the monthly cost is $22. (Excludes taxes and service plan charges.)

It is complicated for Sprint competitors to calculation whether the effect of the new plan causes a financial loss on every customer. If so AT&T and Verizon might wait until the program worsens Sprint’s balance sheet. On the other hand the two largest carriers have extremely healthy balance sheets, and massive customers bases, which they can hold by offering their own versions of the Sprint plan or perhaps ones which are better.

The extremely large count of the two larger carrier’s subscriber bases shows how little leverage Sprint has. According to Strategic Analytics in the fourth quarter, Verizon has 132 million, customers and AT&T had 121 million. Sprint and T-Mobile had about 56 million each. And, T-Mobile (NYSE: TMUS) is known for offering wildly competitive plans to keep and get subscribers on its own. Which means Sprint has another ruthless competitor

Sprint’s disadvantage since it was created by its merger with NexTel in 2004 was its size. That has not changed.

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