Can Sprint's Price Cuts Lure Subscribers Back?

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Includes: S, T, TMUS, VZ, WMT
by: Larry Dignan

Sprint (NYSE:S) upped its bet on prepaid phone services as it launched a new brand dubbed Common Cents Mobile that will be sold online and through Wal-Mart (NYSE:WMT).

The wireless carrier has been struggling with subscriber losses for multiple quarters. The trends have been improving, but Sprint still can’t add customers—the company lost 75,000 net subscribers in the first quarter. At the same time, Sprint has been betting big on prepaid phone service with brands like Virgin Mobile and Boost.

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On Thursday, Sprint unveiled Common Cents Mobile, which will debut at more than 700 Wal-Mart stores beginning May 15 (statement). Sprint is offering 7-cent voice minutes and 7-cent text service.

Among the features of Common Cents Mobile:

  • Minutes are rounded down so if you talk for 1 minute and 50 seconds you pay for 1 minute.
  • Handsets include the LG101, Samsung M340 and the Kyocera S2300.
  • Minutes can be added via a Web site or refill cards.

Piper Jaffray analyst Christopher Larsen said in a research note that Sprint’s plan “brings the per minute cost to a new low for pay-by-the-minute services.” Larsen added that MetroPCS (PCS) and Leap Wireless (LEAP) are likely to feel the fallout.

Larsen adds that there’s a prepaid price war underway. He said:

While the plans do not compete directly with the unlimited prepaid offers, we believe another price cut in the industry demonstrates that there are no signs of stabilization in the near-term, and will be read as a negative data point for all prepaid carriers. Additionally, Sprint’s plan will now compete for shelf space at Wal-Mart stores with other service providers, including Leap, MetroPCS, TracFone, Verizon and AT&T.

What’s unclear is whether these value pricing moves can reverse Sprint’s subscriber losses.

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