Sprint will drop two-year contracts and switch to leasing smartphones

Sprint is abandoning two-year smartphone contracts, said chief executive Marcelo Claure, the latest move by the Overland Park wireless company in its quest to sign up more customers.

Sprint joins T-Mobile, which led the way in dropping long-term contracts two years ago, and Verizon Wireless, which made a similar announcement last week. That leaves AT&T as the last of the big wireless providers to offer subsidized smartphones in return for locking in its service for two years.

Claure, in interviews with The Wall Street Journal, CNBC and Bloomberg Television, said Sprint customers by the end of the year will have to pay the full price for their phones or spread the payments out by leasing the device, an option Sprint started last year. Sprint says 51 percent of customers who got a new phone last quarter used its lease option.

Unbundling the service and the device purchase will save customers money, Claure said on CNBC. Sprint has been emphasizing price in the battle for customers, offering to cut many Verizon and AT&T customers’ data costs in half if they switch to Sprint.

Sprint on Monday also announced a new iPhone Forever plan, allowing customers to always be able to upgrade to the latest 16G iPhone upon its release — in return for paying an extra $22 a month.

Sprint, long the No. 3 U.S. wireless company, recently slipped behind T-Mobile, which has been gaining customers rapidly. Sprint is gaining customers again after years of erosion while it upgraded its network. But it still ended the quarter June 30 with just under 58 million subscribers, while T-Mobile had almost 59 million.

Claure also noted that Sprint improved in several categories of network quality in the latest national rankings by RootMetrics, released Monday, and remained No. 3 overall, ahead of T-Mobile. He and T-Mobile CEO John Legere also renewed their Twitter feud — including some vulgarity — with Claure noting Sprint’s service edge and Legere denigrating the RootMetrics’ survey as “ancient.”

Also Tuesday, SoftBank Group increased its stake in Sprint a second time this month, acquiring an added $73 million of Sprint stock.

The Japanese carrier paid for 16.8 million shares, according to Bloomberg calculations based on a SoftBank filing with the Securities and Exchange Commission. The latest purchase follows an earlier $87 million investment in Sprint that the Tokyo-based company announced last week.

SoftBank’s billionaire founder, Masayoshi Son, has reiterated his commitment to Sprint as it shows signs of recovery after recording its third consecutive gain in subscribers. Son has said he already sees “light at the end of the tunnel” for the carrier, which booked losses in six out of the past seven quarters, but the turnaround may take two years.

The acquisition raises SoftBank’s stake to slightly more than 80 percent, said Hiroe Kotera, a spokeswoman for SoftBank in Tokyo. The company has said it will limit its holding to no more than 85 percent, which would make Sprint a target for delisting.

“We are on the verge of a massive Sprint turnaround, and we feel very good about our prospects,” Claure said. “And that’s why SoftBank continues to invest in Sprint.”

This story was originally published August 18, 2015 at 12:38 PM with the headline "Sprint will drop two-year contracts and switch to leasing smartphones."