Beginning next month, the third largest wireless carrier
Sprint Nextel Corp.
) will offer the popular
) iPhone through its no-contract prepaid Virgin Mobile brand.
The move will make Sprint the second carrier to offer prepaid
Leap Wireless International Inc.
). Leap is expected to offer iPhone from June 22 on a prepaid basis
through its Cricket brand.
Leap's Cricket will offer iPhone 4S for $499 and iPhone 4 for
$399 with a prepaid service monthly plan of $55. The iPhone 4S has
data storage capacity of 16 GB while iPhone 4 can store up to 8GB
of data. Cricket will throttle the speed if data usage exceeds 2.3
GB per month.
Sprint has not yet disclosed its pricing plans for iPhones.
Currently, Virgin Mobile provides unlimited data for $35 per month
and throttles the speed after 2.5 GB of data usage. In addition,
Sprint offers iPhone 4 for $99.99 and iPhone 4S for $199.99, much
lower than Leap's price.
Further, Cricket covers a small market, say about 20% of the
populace, while Virgin Mobile has a nationwide footprint. We
believe prepaid iPhone from Sprint would be widely adopted as
compared to Leap's Cricket brand. Also, the prepaid offering will
help Sprint to fulfill its promise of paying $15.5 billion to Apple
over the next four years. The company has to pay 40% more subsidies
on iPhones than other smartphones. This equates to more than $200
Sprint's prepaid wireless service is considered the major growth
arena as contract (post-paid) customers are dwindling. Sprint added
489,000 prepaid users while lost 192,000 post-paid customers in the
first quarter. Multi-brands like Boost Mobile, Assurance Wireless
and Virgin Mobile, as well as innovative offers like $50 Monthly
Unlimited plan with Shrinkage, Beyond Talk and Broadband2Go are
contributing significantly to the company's prepaid subscriber
Additionally, Sprint plans to launch WiMAX service on a prepaid
basis for both Virgin Mobile and Boost Mobile later this quarter.
These expansions will provide Sprint a competitive edge over
prepaid wireless carriers such as Leap,
MetroPCS Communications Inc.
America Movil S.A.B. de C.V.
Verzion Communications Inc.
We are maintaining our long-term Neutral recommendation on
Sprint. For the short term (1-3 months), the stock retains a Zacks
#3 (Hold) Rank.
APPLE INC (AAPL): Free Stock Analysis Report
AMER MOVIL-ADR (AMX): Free Stock Analysis
LEAP WIRELESS (LEAP): Free Stock Analysis
METROPCS COMMUN (PCS): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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