T-Mobile Leads, Sprint Suffers in Pricing Wars
Has competition in the wireless industry really boiled down to price alone?
That's what Moffett Research's Craig Moffett believes, and he's crowning T-Mobile US Inc. the clear-cut winner and Sprint Corp. (NYSE: S) the loser. AT&T Inc. (NYSE: T) and Verizon Wireless certainly aren't hurting, but they'll likely have to drop prices soon too, the analyst finds.
His logic is sound: Two years ago, the operators competed on network quality, handset selection, and price, which left little room for T-Mobile, whose handset selection was weak, or Sprint, whose network quality was awful, to compete. Now, handset selection is for the most part on par across the big four and network quality has become too nuanced an idea to measure with LTE rollouts well underway and spectrum positions ever in flux.
Price is now the bottom line. This is why so many MVNOs have popped up -- the more pricing has changed, the more desire consumers have for cheaper alternatives. This environment, along with its aggressive "uncarrier" messaging, has helped T-Mobile make a comeback in a big way. Moffett finds that its pricing cuts are attracting high value consumers, not just the credit-challenged, as feared. Sprint, meanwhile, continues to bleed customers. (See: Here Comes the Unlimited 4G Price War.)
Moffett's conclusion is that Sprint will need to cut prices on its services or its handset prices in order to compete. While it's the only operator offering unlimited data, its prices are on par with AT&T and Verizon, which isn't justified given its network deficiencies that will persist for the next year or two. What's more, AT&T and Verizon may also find themselves cutting prices in order to catch up with T-Mobile. (See: T-Mobile Touts Value in 4G Price War.)
"Sprint is now playing catch-up... T-Mobile is now the industry's price leader despite having a substantially stronger network than Sprint," Moffett writes. "The ball is in Sprint's court."
The pricing war should ultimately be good news for consumers. We’ve already seen pricing get more creative in terms of shaking up the subsidy model, offering data-sharing options, and getting rid of the contract in many cases. But, with the exception of T-Mobile, prices are still quite high. (See: T-Mobile: Might As Well JUMP and Sprint Fires Back at T-Mobile With Unlimited Guarantee.)
Lower prices will be a welcome change, and a necessary one for Sprint. I expect all the operators to respond in the coming months, just as they did in the prepaid space. When price is the main -- or perhaps, only -- way to differentiate, down is the only way to go.
— Sarah Reedy, Senior Editor, Light Reading