May 7, 2010
Sprint next week will introduce a new cellular service plan targeting young people who use their phones more for text messaging than talking.
On May 12, Sprint Nextel Corp's Virgin unit will offer Beyond Talk, three new pricing plans that will include unlimited texting, email and Web surfing.
While most U.S. cellphone plans center around voice services and include data as an extra and often pricey benefit, Beyond Talk is part of a new Sprint strategy aimed at zeroing in on the fiercely competitive prepaid cell market, where customers can pay for calls in advance rather than committing to long-term contracts.
The new offer is the first designed to woo 18 to 24 year-old budget-conscious cellphone users who are texting more and talking less, making as few phone calls as possible, said Dan Schulman, the head of Sprint's prepaid business. For young people, "voice is a technology of last resort. It's not the way they want to communicate," said Schulman, who was chief executive of Sprint wholesale customer Virgin Mobile USA, before Sprint bought the business late last year.
The $25 Beyond Talk plan will include unlimited data offerings and Web surfing, but limits phone calls to 300 minutes a month. Sprint will also sell a $40 plan with 1,200 call minutes for people who still like to talk but want unlimited texts and mobile use of social Web services like Twitter and Facebook. A $60 plan will include unlimited calls. For the first time, Virgin Mobile customers can add Blackberry data service to any of these plans for an additional $10.
Beyond Talk will appeal to a more savvy, tech-focused crowd that doesn't want to be locked into a two-year contract but still wants to take advantage of what smartphone applications offer, said Chris Hazelton, research director mobile and wireless, at The 451 Group, in Boston. "It's not a huge market segment … but there are those who are interested in a prepaid plan. The only issue is the upfront payment, because you have other carriers who may charge a little more but subsidize the price of the device. The U.S. market is addicted to subsidies for smartphones."
Sprint is betting heavily on the prepaid market and purchased Virgin Mobile last year for $483 million. "This is the year that prepaid moves to the forefront of the wireless industry," said Shulman. "In the first quarter of 2010, more than half of the mobile gross additions in the U.S. selected prepaid, and we predict that approximately 70% of the net adds in 2010 will choose plans without a contract."
The company is hoping the strategy will help it rebound after reporting subscriber and profit losses in the first quarter. Sprint Nextel said last month that it lost $865 million on revenue of $8.1 billion, and that it lost a total of 75,000 net subscribers in the quarter. However, the company noted that some parts of its subscriber population -- prepaid signups in particular -- performed well.
The carrier is also preparing to launch a handset and a nationwide 4G network that it hopes will return it to its former glory and profits. Sprint has already written off $30 billion on its Nextel acquisition, and said its Nextel iDEN network lost nearly 447,000 customers. Sprint's CDMA network lost 131,000 post-paid customers and failed to sell the iDEN network. The company is hoping to fare better as a prepaid network.
"With almost 60 million people now on prepaid service," Schulman said, "the no-contract market has clearly moved beyond the credit-challenged and lower-income segments. The prepaid market has changed dramatically, with customers across multiple demographics and lifestyles demanding a wide variety of handsets, features, and plans tailored to their specific needs and wants."
Other carriers offering prepaid service include Leap Wireless, MetroPCS Communications and Tracfone, a unit of America Movil.
Hazelton said carriers like MetroPCS and Leap will likely try to offer competitive plans to Beyond Talk but doesn't believe Verizon and AT&T will, noting that Sprint has a $99 Simply Everything unlimited monthly plan for call and data and navigation, "but you didn't see AT&T and Verizon following that model."
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