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In March, we wrote an article examining the impact of AT&T (NYSE:T) and T-Mobile’s merger on Sprint (NYSE:S). We noted that, apart from pushing for 4G, Sprint could do well to distinguish its services through new and powerful marketing campaigns. It looks like that company has now done just that. Below we discuss what Sprint is doing and the potential impact on its stock value. Apart from AT&T and T-Mobile, the other big competitor for Sprint is Verizon (NYSE:VZ).

Sprint’s Move Takes Advantage of Uncertainty and Reflects Market Saturation

Sprint is offering service credits to customers who switch to Sprint from other wireless carriers. More specifically, the company has announced a $125 credit for smartphone customers, $175 for business and $50 for basic phone customers. [1]

Sprint is clearly not happy with the consolidation that’s likely to happen in the wireless industry as a result of the AT&T and T-Mobile merger, provided it goes through. As a result, the company is shifting gear and looking to take advantage of the transitional instability while it can. As T-Mobile prepares for its merger, there exists a level of uncertainty among its customers and Sprint is looking to lure them to its network. What also works in Sprint’s favor is that its price leadership may appeal to the low ARPU customers that T-Mobile has.

(Chart created by using Trefis' app)

This move also reflects the fact that the mobile market is becoming saturated – one way to grow subscribers in this type of environment is to poach from competitors’ base. If Sprint is able to lure about 5% of T-Mobile’s subscribers during this year, for example, it would imply 6% upside to our $5.84 Sprint stock price estimate.

Our price estimate for Sprint, at $5.84, implies a premium to market price.

Notes:

  1. Sprint offers $175 credit to switch carriers, CNNMoney, May 13 2011

Disclosure: No positions

Source: Sprint Looks to Shake Up the Big Guys