Sprint struggles in prepaid competition

Sprint’s newest subscriber numbers released Tuesday pleased Wall Street, but investors had to overlook big losses on the prepaid side of its business.

The Overland Park-based wireless carrier said it shed 491,000 pay-in-advance customers in the last three months of 2015 on top of the 188,000 lost in the three months before that.

And the rate at which they were leaving Sprint, which is called prepaid churn, ratcheted to its highest level since 2009. Analyst Bill Ho of 556 Ventures LLC called the churn trend “alarming” as it nears 6 percent.

At 14.66 million, Sprint’s prepaid customer count at the end of December was its smallest since September 2011. Other carriers added to their prepaid customer ranks.

Prepaid customers, once considered the ugly stepchildren of the wireless market, have become hot properties in recent years. They had been overshadowed by the battle for traditional cellphone customers who qualify to use a wireless network for a month and then pay for service.

The competition has heated up since AT&T bought prepaid carrier Cricket and T-Mobile bought MetroPCS.

Cellular’s prepaid fight even erupted in a Twitter tiff between T-Mobile CEO John Legere and Sprint CEO Marcelo Claure.

Claure had told reporters Tuesday that Sprint recently “de-emphasized” its Virgin Mobile brand, and Legere retweeted a post by MetroPCS that told Virgin customers they matter to Metro. Claure fired back at Legere, telling him to stop lying about what he was saying.

Sprint recently launched new promotions for its prepaid Boost Mobile brand and promised a revamp of the Virgin brand soon.

Dow Draper, president of Sprint prepaid services, said Sprint pulled its more suburban-oriented Virgin brand from the urban-focused Boost dealerships because it wasn’t winning customers that Boost wouldn’t have won. Virgin still markets through national retailers such as Wal-Mart and Best Buy, as well as online.

Virgin is dropping its payLo feature, which drew customers who stuck around only a month or two.

Virgin gets a makeover soon, though Draper said he couldn’t talk details until the launch is ready.

Meanwhile, Boost announced several new promotions, including an innovative deal that pays customers for advertisements.

Download the Boost Dealz app and ads will pop up on your phone’s home page from time to time as you unlock the device. Watch or swipe them away — either way, Boost will drop the next month’s bill by $5.

Another promotion adds to a Boost customer’s high-speed data allotment for paying on time three months in a row.

Other features give Boost and Virgin customers, after six months, 14 extra days to pay before their phones would be shut off, some flexibility around payday schedules. All of Sprint’s prepaid customers get continued service to receive calls and texts for 60 days after payment is due.

Draper chalks up Sprint’ falling prepaid numbers mostly to the Virgin situation. But he acknowledged the increased competition.

“We knew we’d have to suffer through some of this in the short term,” Draper said. “This is a tough market share game.”

This story was originally published January 27, 2016 at 4:27 PM with the headline "Sprint struggles in prepaid competition."