Can New Sprint Rate Plan Hurt T-Mobile?
Sprint calls its latest plan “All-In” pricing, and the costs are not much different than T-Mobil's plan announced last week.
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The latest shot fired in the battle for wireless subscribers came Tuesday morning from Sprint Corp. (NYSE: S). Last week’s shot was fired by T-Mobile US Inc. (NYSE: TMUS), so we can expect AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) to follow any day now.
Sprint calls its latest plan “All-In” pricing. The plan includes a smartphone plus unlimited voice, text messaging and data. The plan’s price for voice, text and data is $60, plus $20 a month for a two-year lease on a smartphone, for a total of $80. The smartphone choices are the Galaxy S6 from Samsung Electronics and the iPhone 6 from Apple Inc. (NASDAQ: AAPL). There is also a one-time activation fee of $36 and the inevitable taxes and surcharges that can add as much as another 10% to a subscriber’s monthly bill.
In its new package announced last week, T-Mobile introduced a leasing program that focused on letting customers upgrade devices up to three times a year during an 18-month contract period. Under the T-Mobile plan, a subscriber could lease an iPhone 6 for $15 a month and then turn it in or pay $164 to keep it. Voice, text and data plans are not included and have to be purchased separately. And don’t forget those pesky taxes and surcharges.
The T-Mobile plan is aimed at consumers who do not want to wait for a two-year contract to expire in order to get the newest handset available. It also encourages testing a variety of handset hardware.
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Sprint appears to be flogging simplicity. Here is the company’s CEO, Marcelo Claure:
We understand how frustrating and confusing shopping for wireless can be. At Sprint, we are doing things differently. We are telling customers, ‘This is your All-In price.’ … Why can’t everyone just advertise the full price of both the plan and the smartphone – an All-In plan? That was the idea behind what we’ve created.
Sprint included with its announcement a direct comparison with several plans from other carriers, including T-Mobile’s Jump On Demand plan that was introduced last week. In dollar terms, the two plans are very close, especially if a Sprint customer chose to pay the $10 monthly fee for the company’s early upgrade option. On the Galaxy S6, the Sprint price for its All-In plan is $90 a month, including the early upgrade, compared with $108.33 for T-Mobile’s latest offering.
For an iPhone 6, the Sprint All-In plan also costs $90 a month with the early upgrade option, compared with $95.08 until the first upgrade on the T-Mobile plan. After the first upgrade the monthly cost rises to $107.08, according to Sprint’s chart.
Both AT&T and Verizon plans that are offered as comparisons are more than $40 a month higher than the new Sprint plan.
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Sprint’s plan appears to meet its goal of simplicity, but it is fair to ask whether it can possibly make a profit. How long Sprint will be able to hold the line on its data plan pricing is a reasonable question, and the answer from the company is that the price of unlimited data will “probably move around a little bit.” The offer from T-Mobile is not significantly different in its pricing, and the same question is fair to ask of it as well.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
