Online wireless retailer and mobile virtual network operator InPhonic Inc. scored a major coup last week, signing a deal with Sprint Corp. to manage Sprint’s targeted e-commerce initiatives using InPhonic’s online marketing channels and e-commerce platform. The deal also strengthens InPhonic’s ties with Sprint, which is InPhonic’s network partner for its Liberty Wireless and Viva Wireless MVNOs.
The online agreement calls for Sprint PCS to direct targeted marketing campaigns to a Sprint-branded, InPhonic-powered Web site. Sprint explained that customers that click on banner advertisements would be directed to the site, while customers attempting to sign up for service through the Sprint.com site would still be handled internally.
“We have seen tremendous growth in online adoption evidenced by a growing number of customers using Internet tools to research and purchase wireless products and services,” said Jeff Lynch, assistant vice president of eBusiness for Sprint. “With InPhonic’s successful history in this area, Sprint will provide our customers with more ways to reach us.”
InPhonic said the site would be privately labeled as a Sprint site with no reference to the InPhonic brand and would handle Sprint’s online credit checks, activations and fulfillment services. Sprint will continue to handle online customer support and billing.
“It will be a purely private branded site and not a co-branded platform,” noted David Steinberg, InPhonic chairman and chief executive officer.
Terms of the agreement were not released, though Steinberg said it was a “long-term commitment.”
Sprint said the deal will improve the online purchasing process for its customers, which analysts have claimed provide up to a 60-percent savings in customer acquisition costs compared with traditional retail sales channels. Steinberg added that previous testing showed the InPhonic platform was able to activate six times as many customers as Sprint’s internally derived online channel and do so at a much cheaper cost to Sprint.
Unlike its previous arrangement with Sprint, InPhonic said it will not be paid the typical sales commission for each new activation, but instead will receive a much smaller transaction fee for each activation.
“We will take a much smaller fee, but Sprint will be handling all of the marketing costs associated with the agreement,” Steinberg said. “This will also allow us to further monetize our e-commerce platform.”
Analysts noted the agreement could prove a compelling short-term solution for Sprint, which has had trouble signing up new customers through its Web site despite high customer usage of online self-service tools.
“Sprint could see a substantial increase in online purchases in the near-term with this deal,” said Compete Inc. managing director T.J. Mahoney. “It could also help them lessen any online sales interruptions as it works through its acquisition of Nextel.”
A recent report from Compete and Bear Stearns & Co. Inc. found that Sprint lagged well behind its competitors in online gross customer additions last year with only 1 percent of the carrier’s new subscribers gained through its online channel. T-Mobile USA Inc. and Verizon Wireless managed to sign up 2 percent of their gross customer additions last year through online channels, while Nextel Communications Inc. garnered 3 percent through its online channel, and Cingular Wireless L.L.C. a segment-leading 4 percent.
The report noted that online sales channels typically provide a 30-percent lower cost per gross addition than traditional sales channels and that online sales increased 70 percent between 2003 and 2004 among nationwide operators to 4.5 percent of total gross customer additions at the end of 2004.
While some questioned Sprint’s need for a long-term commitment in outsourcing its online sales, Steinberg said the price it was providing would make it tough for Sprint to match.
In connection with the agreement, InPhonic said it will launch a new carrier marketing team to support Sprint’s online customer acquisition strategies. Steinberg said he considered the team as a new division of InPhonic’s business and that it would be used to attract similar business from other operators.
“We are working with other carriers to bring them in as well,” Steinberg said. “We will use a Chinese wall between the carriers, but they will use our platform.”
The Sprint deal is not expected to hinder InPhonic’s Wirefly online sales efforts that include most of the industry’s top carriers, including Cingular, Verizon Wireless, T-Mobile USA, Nextel, Alltel Corp. and CellularOne.
