Sprint Sweetens iPhone Forever Plan, Tops T-Mobile's Offer
Sprint Corp.S slashed the price of its iPhone forever monthly plan from $22 to $1 for a period of 22 months, offering a better deal than T-Mobile US Inc.'s TMUS $5 a month plan for 18 months. The offer requires the customers to trade in an iPhone 6 for the newer 16GB version. Older iPhone models can be also traded in but for a higher monthly plan.
Fending off Competition
Sprint has been losing customers for quite some time now. Recently, the company was surpassed by T-Mobile US in terms of customer count. The company witnessed eight consecutive years of losses and now has been trying all means to make a turnaround.
Competition has been fierce among carriers after Apple Inc. AAPL announced a $32 per month leasing plan, compelling the carriers to cut down iPhone prices. Currently, Verizon Communications Inc. VZ offers a $27 monthly plan for a 2-year period while AT&T Inc. (T) charges $21 a month for a 30-month time frame.
Sprint had earlier introduced a $15 monthly deal, which was the cheapest on offer back then, until T-Mobile US launched a $5 plan, which intensified competition to a great extent.
Sprint's aggressive competitive strategy has its own perils. The company already has a debt-laden balance sheet and negative operating cash flow. The company intends to profit from selling the trade-in devices at a reasonable price in other markets, particularly emerging economies. However, the company's financials may take a severe hit if the economic trend in these markets deteriorates.
Meanwhile, Sprint is creating a leasing company specifically for its phone business, which will require considerable amount of funding from Softbank.
iPhone 6S is integrated with a new technology that will suit Sprint's 'carrier aggregation' framework. This will ensure some noticeable network improvements for the carrier and in turn help the company gain traction. Sprint hopes to regain some lost ground through its aggressive pricing policy and network enhancement. However, with its deteriorating financials, are such lofty plans sustainable?
Sprint currently carries a Zacks Rank #2 (Buy).
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