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Telecom & Wireless

Why Sprint Can’t Win With Its New Subscriber Plan

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By Douglas A. McIntyre Published
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Sprint USB device
courtesy of Sprint Corp.
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

READ MORE: Why Sprint’s Stock Has Moved 50% Higher

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

 

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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