Sprint Plan targets low income customers

http://biz.yahoo.com/ap/070517/on_the_ticker_sprint.html?.v=2


NEW YORK (AP) -- Sprint Nextel Corp., looking to reinvigorate its flagging growth rate, hopes to find a spark in the very customer base it has been pushing away over the past few quarters.

The nation's No. 3 wireless carrier is testing a new product that offers unlimited local calls for a low flat rate -- the type of plan that attracts lower-income customers.

The model has been a boon for niche players, and Sprint hopes its new service, Boost Unlimited, will emulate that success. Critics, however, warn that, while it may help Sprint's earnings in the near term, it could end up hurting the company and the industry in the long run.

Sprint is copying the tactics of Leap Wireless International Inc. and MetroPCS Communications Inc.

Sprint's turning to Boost Unlimited illustrates the need for companies to seek alternative methods of growth but also portends the embrace of cheaper plans and more aggressive price competition.

Some fear the proliferation of these plans will spread across the United States and reinforce a growing insistence by consumers on lower rates. More customers may switch to these new plans to save money.

"It's positive for Sprint, but it's not good for the industry," said Timothy Horan, an analyst for CIBC World Markets.

Horan believes the business will be short-term positive for Sprint but end up hurting the company eventually. "Does (Sprint through Boost Unlimited) end up cannibalizing its own business? I think it will," he said.

Saleh, however, said Sprint has seen little migration by customers in its trial markets to Boost Unlimited from its core Sprint service.

Sprint desperately needs the service to succeed as the rest of company looks to turn itself around. Over the past several quarters, it has undergone a painful transformation. By tightening its credit policy, Sprint has shed a raft of lower-quality subscribers, instead seeking customers willing to spend more per month and use its service longer.

But for all its talk of focusing on higher-quality customers, that segment is defecting to Sprint's rivals. In the last quarter, it lost 220,000 valuable contract customers as its growth was entirely dependent on lower-quality wholesale and prepaid subscribers. In the quarter, Sprint also reported a net loss of $211 million, or 7 cents a share, after a profit of $419 million in the same period last year. Revenue stayed relatively flat year-over-year at $10.1 billion.

The unlimited local wireless plan is feasible as a business when a carrier runs an extremely lean operation. Leap and MetroPCS spend little on advertising, offer scant customer service and require customers to buy their own phones.

 

Yeah. They were using credit limit caps on account spending. If you'd go over your spending limit, your service could be affected.

I thought they were trying to get away from that, but possibly due to too many sub losses, they are reconsidering their strategy? Not sure.

Through the mess, looks like you got yourself a good deal with that SERO plan. Is this bye bye to GSM forever?