Sprint launches half-price deal in push for new customers

Push has come to shove in Sprint’s effort to pry customers away from Verizon and AT&T and reverse its shrinking share of the most valuable wireless subscribers.

In a new marketing plan announced Tuesday, it is offering to cut in half the wireless service portion of bills for Verizon and AT&T customers who switch to Sprint. The promotion — off limits to T-Mobile subscribers or even Sprint’s own customers — begins Friday.

Sprint also is offering $350 to cover early termination fees or remaining phone installment payments to Verizon or AT&T that the switch might trigger. The deal is limited to the wireless service part of bills and excludes payments for phones, taxes and other fees.

Still, a half-price service deal is an escalation in strategy over Sprint’s standing offer to double the amount of wireless data customers can get from the two biggest carriers. Sprint is now dangling dollars in front of bargain-hunting shoppers at the height of the holiday shopping season, when many wireless customers are comparing offers.

“I think this was a bold move, and it’s a move necessitated by the situation,” said industry consultant Berge Ayvazian of UBM Tech.

Sprint’s latest move poses some risk to its own finances by making it harder to turn a profit on the customers it gains.

It also offers some evidence that new chief executive Marcelo Claure’s marketing moves so far — while they have helped — have fallen short of expectations.

“It’s a tacit or unspoken admission that the last campaign didn’t go as well as they hoped,” said Roger Entner of Recon Analytics. “Better doesn’t mean good.”

Sprint’s chief marketing officer, however, said the company’s double-the-data campaign has worked.

“It’s been going very well for us,” Jeff Hallock said. “We’ve been pleased with the results we’re getting there.”

Sprint said it has beefed up its sales staff by 500 at stores nationwide because of recent successes, having cut stores and personnel early this year when its share of new customer signings had slumped badly.

Claure, who replaced Dan Hesse in August, has made several quick moves to reverse an exodus of the company’s most valuable customers. He also is trying to crack open the trove of high-dollar subscribers largely locked up by family plans at Verizon and AT&T.

The half-price offer comes as Claure rebuilds his management team and works to slash $1.5 billion from Sprint’s spending, in part by eliminating 3,700 jobs.

An AT&T spokesman declined to comment on Sprint’s new promotion.

Verizon’s Brenda Hill noted in an email that the nation’s largest carrier offers its “best-ever” pricing on some plans and operates the No. 1 wireless network according to recent rankings from RootMetrics. Sprint came in fourth among the national carriers in those rankings.

Claure’s earlier moves aimed at Verizon and AT&T offered some price cuts but mostly enticed family accounts and their multiple devices with more wireless data for their phones and tablets to use in streaming videos, downloading apps and exploring the Internet.

Entner of Recon Analytics said Claure is now slashing prices to “create some positive buzz” around the brand and reinforce Sprint’s message that it offers the best value in the wireless market.

“You have to get people excited about Sprint again and give them a reason to switch,” Entner said.

To do that, Sprint is training store employees for the Cut Your Bill in Half promotion, which runs into January, giving shoppers a short window to make their move. The promotion also is available online.

Sprint is telling Verizon and AT&T customers to bring in their latest wireless bills or upload them to Sprint through its website. They can get unlimited voice and texts plus the same amount of data that their current plan delivers but pay Sprint only half of what they’re paying for those services now.

The half-off price applies to the recurring monthly charges. It ignores payments for a wireless phone or tablet, premium content, international services, apps and other add-ons.

Customers’ new Sprint rates also will stand as long as customers maintain the account as it starts out. For example, if a half-off account increases the amount of data it buys, then Sprint would charge its market rates at the time.

Sprint also is offering up to $350 to cover early termination fees and device bills from Verizon or AT&T that switching might trigger.

In two examples, Sprint said an AT&T family account that bought its devices through installments may be paying $160 a month for four lines and 15 gigabytes of data to share. They could get the same from Sprint for $80 under the promotion.

A Verizon example assumes the family account bought phones at a subsidized price from Verizon. Their monthly bill may total $260 for four lines and 15 gigabytes of shared data. Sprint offers the same deal for $130 a month.

The second example is intended to show the particular value of the half-off deal for many Verizon and AT&T customers who are under older plans.

“Most of them are on higher-priced plans, not necessarily the current pricing from those guys,” said Hallock, the marketing officer. “There’s a lot of money that customers stand to save in switching to this.”

Switchers also will have to buy a Sprint phone by paying full price for a device, buying through installments or leasing the phone from the company.

The deal also requires customers who switch to hand over their Verizon or AT&T phones. Failure to do so triggers a $200 fee for each line for which a phone wasn’t turned in.

Sprint will be able to resell those phones through its affiliated company Brightstar Corp., which Claure founded in 1997 and, like Sprint, is owned by Tokyo-based SoftBank Corp.

“Sprint can capture some value here,” Wells Fargo Securities analyst Jennifer Fritzsche said in a note about Sprint’s new plan.

Joe Euteneuer, Sprint’s chief financial officer, said Tuesday at an industry conference that the phones are one key in evaluating the offer’s benefits. Weighing all the costs and savings for consumers, he said, the deal amounts to a 20 percent discount.

“A lot of them are going to find out that going to some of our existing plans might even be better than cutting their bill in half,” Euteneuer said, citing Sprint’s lower prices overall and higher data allowances.

One question for investors is how well Sprint will make up for the financial impact of its new price-cutting strategy.

Fritzsche said the “headline of this promo is more bark than bite.” Sprint already collects 64 percent less than AT&T and Verizon from these core monthly charges, a suggestion that its new offer is not as dramatically different from its current prices as it seems.

Entner and Ayvazian, however, see the offer as a way to gain badly needed customers in exchange for some short-term financial pain.

“They can afford to take that kind of measure to gain market share and stabilize their base,” Ayvazian said. “They have to take the hit.”

He also suggested that the deal marks a potentially critical stage in Sprint’s efforts to reassert itself into the national competition. It has been the odd man out as AT&T and Verizon dominate the market and T-Mobile has been adding millions of new subscribers.

“If this doesn’t move the market now, it probably never will,” Ayvazian said of the Sprint campaign.

This story was originally published December 2, 2014 at 9:00 AM with the headline "Sprint launches half-price deal in push for new customers."