Sprint Goes Halfsies

Will Cut AT&T, Verizon Subscriber Bills by 50%

Sprint_lSprint has introduced a half-price strategy in the hopes of enticing AT&T and Verizon subscribers to churn over. The operator will match its competitors’ data allowances and throw in unlimited talk and messaging for half the price of what subscribers are now paying AT&T or Verizon. Sprint will also pay up to $350 for termination fees per line, with interested shoppers simply needing to prove their current costs by showing an invoice. Subscribers will have to either bring their own unlocked devices or buy one via Sprint’s financing plan.

It’s one of the more keen endeavours to catch potential defectors on their way out. With the word half, it’s easy to do the maths — this 50% off, red-ticket sale is bound to get noticed, but it won’t be easy to catch its competitors. Sprint has about 60 million subscribers across its various post-paid and prepaid services. Perhaps coincidentally, perhaps not, this is about half the number of subscribers of AT&T and Verizon.

Sprint’s new CEO, Marcelo Claure, announced a few weeks ago that the company planned a major promotion and stated, “You ain’t seen nothing yet.” He might be right. This is perhaps the most expensive marketing plan devised to date to catch individual subscribers. However, AT&T and Verizon customers aren’t likely to blindly migrate based on price alone. Mobile-savvy users can be expected to check coverage maps and quality ratings carefully, and current Sprint subscribers aren’t eligible for the deal, which could lead to unintended churn or further price cuts.

Sprint’s position is consistent with that of a number-three market player. The operator has used a barrage of marketing strategies including an adorable tough-talking hamster to push its Framily plans, yet AT&T and Verizon have been able to outmanoeuvre any disruptions from below.

Sprint and T-Mobile USA are concentrating on price rather than network build-out to gain subscribers. The two could gain and maintain lower-ARPU customers, but history suggests that they’re unlikely to offer any real challenges to AT&T or Verizon and instead will continue to compete against each other for the lower end of the market. Sprint’s sharp pricing plan is being promoted as AT&T and Verizon are keenly bidding record prices for US spectrum (see Daily Insight: Frequency Hopping), an indication of priorities. Bids have now reached almost $40 billion.

Whether Sprint’s half-off Friday is a half-baked idea or complete genius will be difficult to judge by subscriber numbers alone. The American operator needs to drive long-term profitability through service innovation and network quality as well. There are opportunities ahead to disrupt, but this Friday is unlikely to be a black day for competitors.