Sprint Nextel hurting itself at the hands of prepaid wireless companies?

Posted Apr 20th 2009 4:20PM by Brian White
Filed under: Competitive Strategy, AT and T (T), Sprint Nextel Corp (S)

When Sprint Nextel Corp. (NYSE: S) launched the $50 all-you-can-eat wireless plan with its Boost Mobile prepaid brand back in January, it was a shock to the wireless industry. Indeed, prepaid wireless generally is more expensive and less feature-laden than contract wireless in the U.S. But not even contract wireless plans that featured unlimited talking/texting/web access could be found for $50. What was Sprint Nextel trying to do? Cannibalize itself?

That's just what Verizon Communications Inc (NYSE: VZ) CEO Ivan Seidenberg said: that Sprint Nextel would self-destruct due to its Boost Mobile prepaid brashness. Just this month, Sprint Nextel prepaid partner and reseller Virgin Mobile also launched a $50 unlimited talking plan. Should AT&T, Inc. (NYSE: T) be afraid? Nah -- it's doing just fine with the iPhone 3G business these days.

But Sprint Nextel, which is hemorrhaging customers every single quarter, has to do something. That something: compete solely on price with its own contract wireless plans and with its prepaid partners as well. But the question stands: will Sprint Nextel hurt itself as customers realize what a cheap deal they can get without any contract at all?

The funny thing here is that a war is brewing in the prepaid wireless business similar to how a war was waged years ago as national wireless carriers bought each other out and lowered prices to attract customers from each other. But with this war, the big carriers could see some of their precious contract customers switch to these cheap prepaid plans when those contracts are up. After all, do you really need rollover minutes when you have unlimited talk time?

Tags: ATT, S, Sprint Nextel, SprintNextel, T, Verizon Wireless, VerizonWireless, Virgin Mobile, VirginMobile

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Reader Comments (Page 1 of 1)

4-21-2009 @ 10:01AM

James Fisher said...

James Fisher from Sprint here. You raise a number of issues related to our Boost prepaid service that warrant some clarification. Regarding the suggestion that we’ve resorted to some kind of price war, here’s the facts: Over a year ago, we created the Simply Everything plans to make wireless data usage easy and simple for our customers. Every month, they know what they’ll pay, and ultimately we’ve found more people moving up to a one-price data plan because of the greater value, than are moving down from previous higher priced data plans. Simply Everything plans are drawing customers to smartphones and driving greater data usage on our Sprint network every quarter. As the economy worsened late last year, we didn’t significantly change our post-paid plans but we did start highlighting the value of Sprint’s services when compared to Verizon and AT&T. That’s not a price war; that’s just pointing out the obvious. On the prepaid side, as the economy drove wireless growth toward prepaid, we were most strongly positioned in the marketplace to bring the same simplicity to prepaid customers with Boost Monthly Unlimited for $50. We have a nationwide network with ample capacity and the ability to offer more to our customers at one price – and customers are responding strongly. We are offering simplicity, value and productivity across all segments of the wireless market – and supporting a growing wholesale market for wireless device connectivity – which we think is a strong and competitive position in today’s environment.