After years of only minor price plan tweaks and occasional promotional offers, the nation’s four largest carriers have ignited a new pricing war centered around unlimited voice calling minutes for $100 per month. And in a move that begs for a response, Sprint Nextel Corp. last week said it would include unlimited everything in its offer.
Opening bids
Verizon Wireless fired the opening salvo on Feb. 19 when it announced its offer that included nationwide voice calling, with customers able to add unlimited messaging for an additional $20 per month or unlimited messaging and access to its Vcast data service, mobile e-mail and VZNavigator service for an extra $40 per month.
The move was quickly mirrored by AT&T Mobility, which followed with its familiar strategy of matching Verizon Wireless’ offer. Both were trumped hours later by smaller rival T-Mobile USA Inc., which threw in unlimited text and picture messaging with its $100 per month unlimited offering. Unlike the previous push to get people signed up to family plans, the unlimited offerings were geared toward individual lines.
(All plans harkened back to the original AT&T Wireless Services Inc., which launched an unlimited calling plan for $100 per month in 2002 as a way to tempt people to sign-up for its then-fledgling GSM network.)
Sprint Nextel ups the ante
Not to be outdone, Sprint Nextel responded last week by introducing a “Simply Everything” plan that includes, well, simply everything – unlimited voice, data, text, e-mail, Web-surfing, TV, music, GPS navigation, Direct Connect and Group Connect for $100 per month.
The No. 3 carrier’s move was widely expected. Many analysts expected Sprint Nextel to undercut its competitors by as much as $40 or offer an all-in-one plan.
Indeed, the company has done both. In addition to its $100 offering, Sprint Nextel announced a $90 “Talk/Message/Connect” plan that includes unlimited voice, messaging, e-mail, Direct Connect and Group Connect. For customers who don’t need unlimited voice, the carrier is also offering a modified “Everything” plan that includes the unlimited text and data services along with 900 anytime minutes with unlimited night and weekend calling starting at 7 p.m. for $90 per month, or with 450 anytime minutes for $70 per month.
The company argues that all the major carriers have quality voice networks now and that customer appeal will be driven more and more by enhanced data- and media-centric services.
“We’re a step behind the consumer. We have not made wireless simple or let customers use today’s highly capable wireless devices in a simple way for anything but for its most rudimentary function – voice,” Sprint Nextel President and CEO Dan Hesse said in a conference call with analysts after announcing the plan and disappointing financials for last quarter.
“We believe that the battleground going forward will be data. Traditionally in our industry it has been voice. So we’re putting a flag, you know, clearly into the ground that we intend to own the data world going forward. It won’t turn the ship around right away, but it begins to get us on the path.”
Sprint Nextel’s plan won’t require existing customers to extend their contract and families will get an incremental $5 discount for each line added to the plan, the company said.
Beaten to the punch
Sprint Nextel came out of the unlimited gate a year ago with a trial offering in San Francisco that included voice calling, text messaging, data, e-mail and picture messaging for $120 per month.
But, more than a year down the line, the No. 3 carrier missed the opportunity to be first-mover in an industry where public perception carries significant weight. Most agree that Sprint Nextel badly needs a change on that front as its customers continue to leave in droves. Yet, executives clearly decided it was more important to beat competitors on substance rather than the novelty of earlier appeal.
Counter punch?
Now, all eyes will be on Sprint Nextel’s rivals to see whether they will react.
“That’s a huge differentiator,” Bill Ho, senior analyst at Current Analysis, told RCR Wireless News. “Against those carriers that’s a big differentiation.”
For an un-tethered customer looking across the spectrum of plans available with each carrier, Sprint Nextel’s plan will handily get the nod for most value, he said.
“Sprint has upped the value proposition,” Ho said. “If you’re a $90 (per month) guy you’re probably not price sensitive. That’s high value right there.”
The fact Sprint Nextel included its full range of content, navigation services and Research in Motion Ltd. BlackBerry Internet Service support in the $100 plan is significant, Ho said, adding that BlackBerry Enterprise Server can be had for $20 more.
“Will this be substantial? We’ll know next quarter or in a couple quarters,” he said.
Pali Research’s Walter Pieckyk and Joseph Galone wrote that Sprint Nextel’s $100 plan compares to $160 at Verizon Wireless and AT&T Mobility for the same services on smartphones, at which this plan seems most targeted. “That’s a 38% discount but clearly only for a small target audience,” they wrote. “We believe it is inevitable that this level of price cut will extend to all the rate rates.” If rate cuts improve churn, then no amount of cuts will be too high, the pair of financial analysts concluded.
