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Sprint CEO: Price Cuts First, Best Network Next

Sarah Thomas
8/14/2014
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Sprint's new CEO Marcelo Claure is amped up to make the struggling carrier the next disruptor in the US wireless market, and his plan to do so starts next week with new, aggressive pricing plans.

Addressing a company-wide town hall call on Thursday, the new Sprint Corp. (NYSE: S) boss outlined his three priorities: reduce prices, improve the network, and decrease operational costs. Priority number one, price reductions, starts as soon as next week, he said. (See Sprint, T-Mobile: The Price War's On.)

"We're going to change our plans to make sure they are simple and attractive and make sure every customer in America thinks twice about signing up to a competitor," he said, adding that "very disruptive" rate places are coming next week, and Sprint will react quickly to bring competitive offers to potential customers.

"When you have a great network, you don’t have to compete on price," the Brightstar Corp. founder added. "When your network is behind, unfortunately you have to compete on value and price."

Claure didn't elaborate on what the new pricing structures would be, but said that on the day they go live, he wanted dealers knocking on doors and hitting the ground running with selling, and he promised they would have the tools to back them up, something they lacked in the past.


Catch up on all the latest Sprint news on our dedicated mobile content channel here on Light Reading.


In what was a well-received talk, Claure promised to have frank, two-way honest conversations with his new employees, even giving out his direct email address and assuring he'd answer everyone who wrote.

True to form, most of his talk today was centered on delivering the cold, hard truth. He admitted that the network rip-and-replace took too long, social media chatter about Sprint is largely negative, the carrier failed to react to competitive moves, and retail employees have had a hard time communicating the value of Framily, Sprint's version of a family plan.

On the plus side, he said Sprint has a tremendous value in its spectrum holdings and great employees, and he pointed out, no one stays a leader in this industry for 20 years, citing BlackBerry and Nokia as examples. He's confident Sprint can challenge AT&T Inc. (NYSE: T) and Verizon Wireless , but realistic that it will take a long time.

That's why phase two is crucial. Once its new price plans are in place, Claure said Sprint's second phase would be to leverage its spectrum and become America's best network. "I want to make sure we're the incumbent challenger," he said. "We don't want the status quo."

When asked about job cuts stemming from phase three, having the lowest cost to serve, Claure acknowledged they are inevitable, but said he did not yet know to what extent. He said he would make a list of "must haves" and "nice to haves" within the organization, and re-evaluate anything that falls in the later category. (See Sprint's New Boss Plans Cost Cuts and Sprint Lays Off 800 Customer Service Reps.)

Claure also acknowledged that he and SoftBank Corp. CEO Masayoshi Son "spent days and nights talking about the merger I'm not supposed to talk about," and ultimately decided it was not the right thing to do at the same as deciding Claure should replace Hesse as CEO. He complimented T-Mobile US Inc. on its success in disrupting the market, but is clearly more concerned about taking on the big two rather then warding off its still smaller competitor's advances. (See Hesse Out, Claure In: Sprint Is Son's House Now!, A Short History of Hesse, T-Mob's Legere Unleashed: 'Total Chaos at Sprint', and DT Wants Spectrum Favors; Legere Wants Sprint's Slot.)

So this was day four on the job for Claure. Want to know what he did on day one? Meet with Apple Inc. (Nasdaq: AAPL) CEO Tim Cook, he said, because "Apple will become a crucial part of Sprint." (See iPhone 5: Which 4G Carrier to Pick?)

And, if today's pep talk wasn't enough to motivate Sprint employees to achieve his simple goal of bringing in more customers than they lost, Claure promised -- to wild applause -- he'd fly in his business partner David Beckham when that's achieved. That's one way to win over your new employees...

— Sarah Reedy, Senior Editor, Light Reading

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nasimson
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nasimson,
User Rank: Light Sabre
5/30/2015 | 10:12:57 PM
Re: time for pricing AND network improvements
@Ianbrown:

Not defending Sprint. But any company would prioritize solving problems. Customers with those problems that you have de-priortized would somehow mean that these customers have higher-cost-to-serve. If their revenues vs costs dont make sense, then not keeping these customers is not an un-wise decision.

This is just a directional abstract-level point. To what extent does it apply to Sprint and the situation at hand is a whole different question.
lanbrown
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50%
lanbrown,
User Rank: Light Sabre
8/19/2014 | 2:19:34 PM
Re: time for pricing AND network improvements
What does Sprint dropping customers have to do with downloading a Blu-Ray?

 

""While we have worked to resolve your issues and questions to the best of our ability, the number of inquiries you have made to us during this time had led us to determine that we are unable to meet your current wireless needs," the letters said."

So, a customer has issues with their bill, the shoddy coverage or any other number of issues and Sprint just decided to drop them because they called Sprint too much to get it resolved?  Yeah, a great way to run a business.  I wonder why customers are leaving and not coming back.  That's right, rather than actually fix the problem, Sprint decided to get rid of group that complained about it.

 

What "innovative" service has Sprint themselves actually brought out?  By Sprint I mean Sprint, not a company they bought.  Being innovative is not buying a company that innovated something.
jabailo
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jabailo,
User Rank: Light Sabre
8/19/2014 | 12:42:02 PM
Re: time for pricing AND network improvements
On the other hand, Sprint has been on the forefront of the services that people needed, especially in growing suburbs.  Like PCS back in the early 00s which took basic cell phone prices down to consumer levels.  And Clear(wire) in the late 00s which provided the first high speed wireless broadband service.

Sprint is about bringing innovative services to many people at the lowest cost and as such are a threat to more gold plated services.  If that drives the 10% top end "Demanding User" away to somewhere that he can download Blu-Ray movies non-stop for himself and his five other cinemaste family members, then so be it. 

Most of us feel that broadband connectivity -- per se -- is more and more a commodity.   And synchronous two way voice, what we used to call a "phone", is running on these networks anyway.   At some point there is too much capital flowing into these infrastructures without them delivering the real value.  If Sprint can kick out the jams, then so be it.

 
lanbrown
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lanbrown,
User Rank: Light Sabre
8/19/2014 | 12:24:00 PM
Re: time for pricing AND network improvements
If you search on those ads, some people love them but hate them.  The adage that there is no such thing as bad publicity just doesn't hold true all of the time.  An advertiser would say if people remember the ad, it worked.  I would argue that point; just because it was remembered does not actually mean it worked.  The goal is to get people to buy your product; if everyone remembered the ad but no one bought the product, was the ad a success?  One camp would say yes, the other would say no.  I view the Framily commercials as beastiality.  Probably not the mark that the ad company had in mind.

 

NASCAR sponsorship and the Frobinson's ads need to go.  The NASCAR deal goes through 2016; Sprint should not continue it.  If it was working, they wouldn't have the customer add issue that they do.

 

Back in 2011 Sprint said this:

"Sprint officials would not discuss financial terms of the agreement, but praised what it does for their business. Steve Gaffney, the company's vice president for corporate marketing, said after Friday's ceremony that not renewing was never really an option."

 

I really want to know what it does for their business.  Q1 and Q2 of 2014 Sprint saw a net loss of subscribers.  The wholesale is the only place where they saw net adds but it wasn't enough to overcome the net loss seen on the post and prepaid side.

 

Sprint may not renew though given that the discussions were pushed out a year:

"Though the partners were slated to open negotiations this year around title rights to the Sprint Cup Series, sources said that Sprint and NASCAR officials have agreed to push back the exclusive negotiating window in their current three-year agreement until 2015."

 

I bet Sprint wants to see how their financial situation is in a year and if they had to make a decision today, it would be not to renew.  Why would NASCAR want to push it back a year, the quicker a deal is sign means the they are goo through the end of 2019.  Pushing it back only helps Sprint.

 

I wonder how much the current deal is costing Sprint.
mendyk
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50%
mendyk,
User Rank: Light Sabre
8/19/2014 | 12:19:46 PM
Re: time for pricing AND network improvements
Talking animals have been a crowd favorite for millennia.
DanJones
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50%
DanJones,
User Rank: Blogger
8/19/2014 | 11:56:53 AM
Re: time for pricing AND network improvements
I just don't understand why the hamster ever seemed like a good idea.
lanbrown
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50%
lanbrown,
User Rank: Light Sabre
8/19/2014 | 11:29:38 AM
Re: time for pricing AND network improvements
HD can be far more than 2Mbps.  It all depends on the quality you want and the CODEC used.  Using a blanket statement of 2Mbps is just plain wrong.  To be honest, you have never seen HD video.  To the home HD is between 5 and 10Mbps from the providers; a Blu-Ray offers at most 40Mbps.  Guess what, neither of those are true HD as well.  What is HD; people go by the number of pixels and not what is actually driving those pixels.  You can get an HD stream under .5Mbps but the quality is terrible for anything with movement in it.  Slightly "compressed" HD stream from providers is 100Mbps.  Uncompressed is around 3Gbps.  It is a night a day difference from what you see on TV and the slightly compressed streams.

 

The real issue that Sprint has; perception and the many people that they have driven away.  10 or 15 years ago; what did Sprint do to the people complaining about the service?  Sprint told the top 10% to go get service elsewhere.  Their Framily commercials are stupid as well.  So, a ditzy mother, a father that is a hamster, a son and his friend named Gor-Don.

 

Maybe Sprint should cut costs by dropping the stupid ads and getting out of their NASCAR sponsorship; neither of which are actually helping.
danielcawrey
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100%
danielcawrey,
User Rank: Light Sabre
8/18/2014 | 12:38:06 PM
Re: Easy as 1-2-whatever
I think that price cuts are necessary, because Sprint doesn't have the reputation of Verizon in terms of coverage. For many people, that might not matter.

But if you travel a lot or have a mobile workforce, connectivity via wireless networks can often be critical to business. Sprint can alleviate some of the concerns people have with coverage by offering a incentive via pricing. 
kq4ym
50%
50%
kq4ym,
User Rank: Light Sabre
8/18/2014 | 8:34:04 AM
Re: Easy as 1-2-whatever
Cutting prices seems to be a real risky maneuver, unless they can get massive advertising and media hype, it may just be a real money  loser if it fails. There's still lots of price competition out there, they need some really cool publicity to get everyone hyped up about prices to get folks to switch over to Sprint.
briandnewby
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100%
briandnewby,
User Rank: Light Sabre
8/17/2014 | 11:00:19 AM
Re: Easy as 1-2-whatever
I think there is a major culture hurdle for Claure and I assert that he's not hitting it directly and, thus, he won't be successful.  I didn't think Dan Hesse would be successful, either, and I'd argue that he wasn't.

Claure built a business--a huge business, and that's impressive.  And, it's so huge, of course, that he has experience running a $10 billion business.  So, to say he's not an operations guy is off the mark a bit, but his experience is running sometlhing he built. 

I worked there a long time, pre-Hesse, but the culture is a "determined to be number three," mindset.  Layoffs won't help with that.  You can't make non-entreprenuers entreprenuers.  If employee engagement is an issue, sometimes you just need new employees, and Son clearly thinks that engagement could be better.  Already, the first moves are throwbacks to 1990s ("Sprint Business").

I think Claure should build a new Sprint, in California as rumored or somewhere else, handpick organizations and key executives to make that move, and shudder the rest.  That's different than layoffs.  And, he has to do it fast, decisively.

He's proven he can build a business, and I think he should build this one, using assets that exist.  Trying to simply transform Sprint, politely taking the baton from Hesse and promising a new Sprint, which is where this feels like it's headed, is not the answer.
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