Sprint mobile plan could spark US price warFT.com / Companies / Telecoms - Sprint mobile plan could spark US price war
published: January 15 2009 22:32 _ by Paul Taylor in New York
Boost Mobile, Sprint Nextel’s prepaid mobile unit, launched a $50-a-month nationwide unlimited calling plan on Thursday, raising fears of a US pricing war and sending shares of rivals Leap Wireless and MetroPCS Communications tumbling.
Leap dropped $2.47, or 8.9 per cent, to $25.23 in Nasdaq Stock Market trading. MetroPCS fell $2.10, or 13 per cent, to $13.87 in New York Stock Exchange composite trading.
Boost is targeting the nationwide plan, available to customers from next week, at budget-conscious consumers concerned about the cost of operating a mobile phone.
It will provide customers unlimited voice, text and web access and, unlike the regional unlimited plans offered by Boost’s rivals, has no roaming charges. Boost believes the new offering will be attractive to its existing customers and those of rival carriers, including the leading monthly contract providers such as Verizon Wireless, AT&T’s Mobile unit and Deutsche Telekom’s T-Mobile USA.
“The price point is a new low in the wireless market, where even Sprint’s own flagship brand charges $99 for its ”Simply Everything” plan, and where comparable value-oriented plans from MetroPCS and Leap are in the $60 range,” said Craig Moffett, a Sanford Bernstein analyst. “Unlike Metro and Leap, however, the new Boost plan doesn’t have regional restrictions, putting it more directly in more competition with Verizon, AT&T and T-Mobile.”
Verizon Wireless - the nation’s largest wireless carrier following the acquisition of Alltel at the start of this year - and AT&T both offer unlimited voice call plans for $99 a month.
“This plan is designed to be disruptive,” said Matt Carter, Boost’s president. “Wireless consumers know there’s a lot of wrong out there – activation fees, overage charges and extra costs for services like voicemail and roaming."
"Unlike some other prepaid services, our new flat-rate plan will not include any of these charges; what you see is what you get,” he said. Boost claims that once roaming and other charges are added in, comparable pre-paid plans from its rivals cost $60 or more a month.
Boost offers mobile phone services using Sprint Nextel’s iDen nationwide network and is hoping that the flat rate features of the plan will appeal to current customers who spent an average of $31-a-month in the third quarter.
In contrast Leap and MetroPCS, which abandoned merger plans last year, operate regional networks but recently signed a roaming agreement that enables them to offer coverage to about 200m people in the US.
To date prepaid services in the US have been less successful than similar offerings in other markets’ although some analysts believe the current economic recession could fuel further growth as traditional contract customers seek to limit their spending.
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