Light Reading
Pricing is the only way to differentiate in mobile now, and Sprint's losing precious ground to T-Mobile.

T-Mobile Leads, Sprint Suffers in Pricing Wars

Sarah Reedy
10/7/2013
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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

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DanJones
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DanJones,
User Rank: Blogger
10/7/2013 | 5:16:42 PM
Re: Unlimited, but expensive
Seems optimistic for sure but that's the CEO's words. These 2 years are totally crucial in terms of updates for Sprint whatever happens.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
10/7/2013 | 4:57:59 PM
Re: Unlimited, but expensive
If SoftBank succeeds in two years, it will be a miracle. That's not entirely a reflection on Sprint, it's just that turnarounds aren't completed too quickly in most businesses.
DanJones
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DanJones,
User Rank: Blogger
10/7/2013 | 4:54:33 PM
Re: Unlimited, but expensive
SoftBank is looking at the Sprint turnaround as a 2 year process.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
10/7/2013 | 4:49:02 PM
Re: Unlimited, but expensive
Softbank might be better to do that, but depending on their plans when they purchased Sprint, they might think the short term gains from higher pricing might prove to be better financially.

Softbank might also consider the unlimited plans the best differentiating factor Spirnt has. If it is differentiating enough, people will pay for it.
SarahReedy
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SarahReedy,
User Rank: Blogger
10/7/2013 | 4:36:42 PM
Re: Unlimited, but expensive
Do you think Softbank won't allow them to ditch unlimited or to lower prices? I'm sure they want to hold on to unlimited for as long as they can, especially given all the ads plastered wtih it, but Softbank might be smart to trade lower prices/lower returns for subscriber additions in the short term.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
10/7/2013 | 4:34:23 PM
Re: Unlimited, but expensive
Sprint probably should change its pricing structure to compete, but the execs at Softbank may not allow it. They're controlling what happens at Sprint now -- for better and for worse.
SarahReedy
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SarahReedy,
User Rank: Blogger
10/7/2013 | 3:00:50 PM
Unlimited, but expensive
It's really hard to compare pricing plans because all operators do things differently (on purpose too...to make it hard to compare), but T-Mobile ends up significantly cheaper than its rivals, Moffett finds. I understand why Sprint had to raise prices awhile back, but I don't understand why it doesn't lower them now. I think it'll have to as it waits to complete Network Vision and have a good network story to tell. 

Does it think its unlimited messaging will be enough to sustain it without lowering prices? Do you?
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