Sprint’s half-off rate customers face higher bills, meaning more revenue for company

For two years, Sprint’s popular half-off promotion has been loading its network with new customers plucked from rivals. The question now is how much more those customers will pay to stay at Sprint.

They’ll have to pay more because those half-off deals were good for two years, and the early rounds of promotions are starting to expire. It means those customers’ rate plans are about to double — unless they find an alternative.

“We have the contractual rights to double their bill, but we don’t plan to do that,” Sprint CEO Marcelo Claure said Tuesday during a conference call with analysts after the Overland Park-based company released quarterly financial results.

Instead, Sprint has created a “base-management team” to entice customers going off the half-rate deals to sign up for Sprint’s other plans. Already, Claure said, tens of thousands have picked the plan Sprint prefers.

“We plan to migrate as many as we can into our Unlimited Freedom plan,” Claure said, adding that “they’re going to be paying more.”

He said collecting more from these customers represents one of Sprint’s best sources of profitability because the company essentially already has spent the money to bring them on board.

Sprint definitely wants to keep the half-rate customers and could use the added revenue as they buy up to another rate plan. It would add to gains the company reported on both fronts in its regular quarterly update on Tuesday.

The Overland Park-based wireless company said it added 740,000 subscribers in July, August and September to reach 60.193 million at the end of the quarter. That is still No. 4 in the industry but up from 58.578 million a year ago.

Revenues also grew to $8.25 billion, 3 percent higher than a year ago. Sprint still lost money but less so, posting a $142 million loss compared with a $558 million loss a year ago.

Sprint’s finances have been helped by its ongoing plan to cut costs, with $1.1 billion being eliminated so far in its goal to cut $2 billion by the end of March. And Claure promised continued aggressive cost-cutting next year as the company changes the way it does business to operate more efficiently.

The trends so far pleased Claure, particularly the first year-over-year increase in revenues in what he said is essentially the middle year of his five-year turnaround plan for Sprint.

“It’s a great sign of a turnaround,” he said.

Claure had talked three months ago about ending the half-off deal “in the not-so-distant future,” but the company continues to offer it online. It allows a Verizon, AT&T or T-Mobile customer to get the same data deal at Sprint for half what the other carriers were offering. In practice, Sprint has said, most chose to pay the same amount to Sprint and get a larger data plan.

Claure launched the first round of half-rate offers to Verizon and AT&T customers just ahead of the 2014 holiday shopping season. Claure said many half-off deals will start expiring in January, hence the push to convert those customers to other Sprint deals to avoid losing them back to the competition as this year’s holiday season unfolds.

Sprint extended the half-off deal to T-Mobile’s customers a year ago.

David Novosel, an analyst at Gimme Credit, said he expected T-Mobile to pursue Sprint’s expiring half-rate customers with its own deals. He said AT&T and Verizon are less likely to cut their own prices to gain Sprint customers.

Shares in Sprint closed Tuesday at $6.50, down 42 cents, or 6.07 percent.

This story was originally published October 25, 2016 at 7:09 AM with the headline "Sprint’s half-off rate customers face higher bills, meaning more revenue for company."