Sprint Nextel reinforces no-contract plans

If prepaid is the future, then count Sprint Nextel Corp. as going all in on the no-contract wireless front.
The carrier today unveiled its latest card to play in the prepaid game with the release of its Common Cents pay-as-you-go service that provides a traditional prepaid plan for customers. Voice calls are billed at 7 cents per minute with the hook that calling minutes are rounded down to the nearest minute instead of up as is done with other calling plans. The service also provides for text messaging priced at 7 cents per message sent or received.
Distribution for the offering will be through Wal-Mart Stores Inc. using both their retail locations – 700 stores at launch – and online storefronts. The Common Cents offering will also be available through a dedicated Web site.
Initial devices for the offering will include LG Electronics Co. Ltd.’s 101 priced at $20 (actually at $19.77, but who’s counting), the Samsung Electronics Co. Ltd. M340 at $40 ($39.77) and Kyocera Wireless Corp.’s S2300 at $70 ($69.77). Refill cards for the service will be available at $20 that is good for 30 days and $30 that is good for 60 days. Customers can add unlimited messaging for $20 per month and access data services at $1 per megabyte per day.
The carrier hinted at the new offering during its first quarter conference call late last month, in which the carrier continued its recent streak of posting strong prepaid growth that nearly offset its postpaid losses.
The new service joins Sprint Nextel’s Boost Mobile and Virgin Mobile offerings in catering to customers looking for wireless service without signing a contract, which is a rapidly growing segment for the industry. In addition, Sprint Nextel continues to offer its Assurance service that it picked up when it acquired Virgin Mobile that provides a free phone and 200 calling minutes per month to qualified customers in a handful of states.
According to Bob Stohrer, VP of marketing for Sprint Nextel’s prepaid brands, the Common Cents offering targets consumers looking for a traditional prepaid service and not interested in the growing number of unlimited offerings hitting the market.
Those offerings include the carrier’s own Boost Mobile service, which nationalized the no-contract, unlimited calling plans when they launched in early 2009 using the carriers iDEN network. Sprint Nextel has since began offering access to its CDMA network and devices for its Boost Mobile customers. Boost Mobile will continue to offer a pay-as-you-go option, but is priced at 10 cents per minute and includes other data and messaging features. Sprint Nextel recently updated the Boost Mobile offering to add more features.
The service will also sit next to the Virgin Mobile service, which recently dropped its pay-as-you-go option and voice-centric focus for a more data-centric model that targets consumers looking at data and messaging services first, and voice second. Sprint Nextel recently began to phase out the postpaid offerings from Virgin Mobile’s plate that it acquired when it bought Helio L.L.C. in 2008. Stohrer said Virgin Mobile will continue to support customers currently on its pay-as-you-go service, but that over time it will look to evolve that strategy in migrating those customers.
“The other brands are more about monthly unlimited offerings,” Stohrer explained. “This allows Virgin and Boost to more effectively target their specific audiences.”
Stohrer noted that Boost Mobile is a “straight forward, no BS, unlimited talks plus data and messaging” service targeting the 18-49 year old demographic. Virgin Mobile is “all about beyond talk that leads with unlimited data and then lets you pick your talk options” targeted at a slightly younger 18-35 year old demographic. Common Cents’ demographic is the 25 and older crowd looking for a more traditional prepaid offering, that according to Sprint Nextel still represents roughly half of no-contract customers.
“From a competitive standpoint, Boost has great momentum and at its core is competitive against other prepaid unlimited players like Metro and Leap,” Stohrer said. “Virgin sits in the prepaid space, but is looking to capture customers migrating from postpaid that are looking for more value.”
Stohrer added that the Boost Mobile offering was really launched as a competitor for the unlimited local calling players like MetroPCS Communications Inc. and Leap Wireless International Inc.’s Cricket service, but with the added benefit of offering nationwide coverage on the carrier’s networks. That success has resulted in recent updates by both MetroPCS and Leap, as well as changes by its nationwide competitors T-Mobile USA Inc., Verizon Wireless and AT&T Mobility.
The Common Cents offering will also see some competition in the Wal-Mart channels as the retail giant has seen significant success with the Straight Talk unlimited service. The Straight Talk offering is provided through Tracfone Wireless Inc. and uses Verizon Wireless’ nationwide network.
Analysts were generally positive on Sprint Nextel’s aggressive play in the prepaid space.
“We are taking a very positive stance on the Sprint Prepaid Group’s multi-brand segmentation strategy, because it is betting that wireless prepaid growth will fuel corporate revenue,” Current Analysis’ Maidy Whitesell and William Ho noted in a research report. They added that the new Common Cents offering along with the new focus of both Boost Mobile and Virgin Mobile will require a reaction from its competitors.
“Boost Mobile and Virgin Mobile provide alternatives to Tracfone’s Straight Talk and Net10 Unlimited,” the report noted. “It is certain that unlimited carriers such as MetroPCS and Leap will also be affected, in addition to smaller MVNOs with smaller marketing muscle such as Page Plus. The Common Cents brand, with its landmark, simple 7 cent proposition, threatens all pay-as-you-go providers, especially Net10, as it usurp that carrier as the low-cost provider – an important distinction, especially to higher-churning and price-sensitive users.”
Current Analysis did note that the new offerings could impact margins for all com
panies involved, as well as cause some confusion between the Boost Mobile and Virgin Mobile o
fferings that include similar plans for Research In Motion Ltd.’s Blackberry devices. Sprint Nextel’s Stohrer acknowledged the potential for overlap between Boost Mobile and Virgin Mobile in some segments, but countered that the carrier would rather have some overlap instead of any gaps in its offering.
Stohrer added that the carrier would also tout the nationwide reach of Sprint Nextel for all of its prepaid offerings, noting that benefit is especially important when compared to competing offers from MetroPCS and Leap. The carrier is also looking at further integrating its distribution efforts for the Boost Mobile and Virgin Mobile offerings to take advantage of Boost’s reach in some of the bigger retailers and independent wireless locations and Virgin Mobile’s reach in mid-sized retailers.