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Sprint, T-Mobile: The Price War's On

Sarah Thomas
7/30/2014

Up to this point, the pricing changes the US wireless operators have been making have seemed more like rhetoric than actual savings, but now both Sprint and T-Mobile are signaling that the price war is about to get real.

First T-Mobile US Inc. lowered its family plan pricing to $100 for 4 lines and 10GB of data, a full $60 less than the competition. The deal does have its caveats -- each line is limited to 2.5GB and it's only available until the end of September -- but it's a pretty compelling offer if you can act quickly.

What T-Mobile's new offer really highlighted is how weak Sprint Corp. (NYSE: S)'s looked in comparison. Sprint's comparable Framily plan costs $160, includes only 4GB of data, doesn't allow for tethering, and charges overages. The inherent weakness of this is something Sprint CEO Dan Hesse acknowledged on the company's second quarter earnings call Tuesday morning. (See Sprint Seeds Market with LTE-A Handsets and Sprint Earns $23M in Q2.)

Hesse noted that while the plans were competitive when they launched earlier this year, the market dynamics have changed. As such, Sprint plans to experiment with lower pricing plans. The Sprint boss said these experiments will be for both unlimited and tiered plans, but stressed that customers still really want unlimited, so he'd be "very surprised" if new plans don't have an unlimited element.

"It was competitive then, but it's become less competitive at certain line levels," Hesse admitted of Sprint's Framily plans. "It's too early to have results, but we'll learn from those trials. We haven't made decisions yet, but may need to make adjustments to pricing levels based on what we learned."

On the prepaid front, Sprint's Virgin Mobile USA Inc. (NYSE: VM) brand launched a new Wal-Mart exclusive plan, Virgin Mobile Custom, that lets customers build plans around their usage -- lines start at $6.98 a month, plus $5 unlimited access to Facebook, Twitter, Pinterest, or Instagram, or all four for an extra $10 per month. The plans are changeable on the fly from customers' mobile phones and also include granular parental controls.

The new plan, like AT&T Inc. (NYSE: T)'s toll-free data plans, is already getting some flack for encouraging use of certain apps over others, but it's something Sprint more or less admitted it's exploring as well.

It's clear that operators are moving from treading lightly into pricing customization into full-fledged data plan shakeups and experiments. This should ultimately be a good thing for the carriers and potentially even their customers, especially if the price war that Sprint and T-Mobile are trying to spark does take hold.

Of course, this could all be a moot point if Sprint and T-Mobile merge, as they are hoping, but it's good to see they're keeping each other -- and their larger competitors -- on their toes in the meantime. (See Sprint, T-Mobile Settle on $32B Price and Sprint & T-Mobile: A Tale of Two Maps.)

— Sarah Reedy, Senior Editor, Light Reading

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briandnewby
briandnewby
8/1/2014 | 11:23:21 AM
Re: Big difference
We are an election office, so our needs are seasonal.  The $3,000 per month is an average, with much of it spent in two separate one-week periods.  So, we wouldn't really be swinging, but you're right--we have a sweet deal on the handsets ($0).

The bigger issue with other carriers would be the ability to leave them--not just termination fees, but investing the time to get to a live person to cancel (it's a bad horror movie if you have AT&T service and try to cancel on the web).
pcharles09
pcharles09
7/31/2014 | 11:52:16 PM
Re: Big difference
@MarkC73,

"I was on a single bar as far as reception and pulled about 10mbps down/6 up during peak hours"

WOW, with Sprint, I'm lucky if I can barely place a call when I have less than 2 bars. That's impressive. I haven't even tried using data when the bars (or dots in my case) are that low.
pcharles09
pcharles09
7/31/2014 | 11:50:37 PM
Re: Big difference
@briandnewby,

Do you have a backup provider in mind just in case your connect jumps ship? If yes, would you mind sharing. My guess is that the 3k/mo would turn into a lot more...
MarkC73
MarkC73
7/31/2014 | 10:52:09 PM
Re: Big difference
Yes it's pretty awesome bang for the buck, I'm sure complaints and coverage are regionally dependent, but my most frequent hangouts are all pretty well covered where I'll get at least HSPA+, but I do sync up to the LTE network as well.  I was on a single bar as far as reception and pulled about 10mbps down/6 up during peak hours.  Maybe I'll try and do some spot testing during different times in different areas.  While that's far from stellar, I'm not sure of all the factors and have no reference.
briandnewby
briandnewby
7/31/2014 | 9:29:39 PM
Re: Big difference
I run a government office, about the size of a medium-sized small business, 16 full-time employees, 50 part-time, and about 2,000 seasonal.  Cellular (is it really called that--it's really a subset of "mobile" or "wireless "and it seems so pretention to say 3G/LTE) is a large expense for us.

We use hotspots, smartphones, and tablets, and our telecom costs this year will be about $3,000 a month.

We use Sprint and have an excellent account manager.  I used to work for Sprint, 10 years ago at this point, so that might have helped us get more attention or better service initially, but if he changed jobs, I don't think we'd get the time of day from any of the carriers.  We would be telesales at best.

There's something between "Framily" and enterprise, and it seems like a sweet spot not being addressed.
pcharles09
pcharles09
7/31/2014 | 7:27:45 PM
Re: Big difference
@briandnewby,

I'd agree with that sentiment. I know alot of business users that still continue with Sprint only for the grandfathered plans. I bet if they had a choice now, they'd take thir business elsewhere. It's going to be interesting to see where they go next if those users jump ship.
pcharles09
pcharles09
7/31/2014 | 7:26:08 PM
Re: Big difference
@MarkC73,

$30 a month. That's a steal. Especially that most of the providers try to force you into the everything plans that usually start areound $80-90/mo before taxes & fees.

I used to have tons of complaints about Sprint but over the years, that's lessened.
briandnewby
briandnewby
7/31/2014 | 11:02:55 AM
Re: Big difference
I think the Sprint business panache is more legacy than real.  Sprint bought Nextel, not knowing why, really--thinkiing it was for "push to talk" but really Nextel was an animal in the small business and government segments.  Much of that tenacity is gone.  Meanwhile, Sprint never had an advantage in the Enterprise space and lost competencies on the wireline side.  Sprint is about as much of a consumer play as T-Mobile going forward, I think.
MarkC73
MarkC73
7/31/2014 | 10:47:19 AM
Re: Big difference
In my local area, most people I talk to about Sprint have nothing but complaints, including business customers and MVNO customers.  While T-Mobile is viewed as the value play.  I'm a T-Mobile customer myself, and though I'm not contributing to their bottom line much, I'm very happy getting my 5G for $30 month, granted I only have a 100 minutes but who actually uses their phone to talk? ;)  ATT and Verizon definitely have better networks but you pay for it.  I guess I could get a group together and make a family plan...
pcharles09
pcharles09
7/31/2014 | 9:36:47 AM
Re: Big difference
I think Sprint has more clout with business users and T-Mobile with consumers so combining may provide the same service but under the same 'brand' umbrella.
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