Sprint's CEO Drops 'Framily' to One-Up Rivals With More Data

Tuesday, 19 Aug 2014 04:37 PM

 

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Sprint Corp. Chief Executive Officer Marcelo Claure is doubling the amount of data available for shared plans, joining the U.S. wireless industry’s price competition a week after taking over the company.

Customers who switch to Sprint can have as many as 10 wireless lines share 20 gigabytes of data for $100 a month, the Overland Park, Kansas-based company said in a statement.

T-Mobile US Inc., which has been a leader on promotions in the market, offers four lines with 10 gigabytes of data for the same price. Sprint’s new offerings are dubbed the “Sprint Family Share Pack,” as Claure puts an end to the previous “Framily” plans.

After backing off this month on a plan to merge Sprint with T-Mobile, Sprint Chairman Masayoshi Son brought in Claure, who founded phone distributor Brightstar Corp., to reinvigorate the ailing wireless carrier. Sprint and T-Mobile are jockeying to emerge as a strong third competitor to loosen the grips of Verizon Communications Inc. and AT&T Inc. on the U.S. mobile-phone market. T-Mobile’s four-line, 10-gigabyte plan was itself a response to AT&T’s $160-a-month service.

“We did a lot of research with customers. Data use is growing exponentially; customers are getting angry at a bill that is larger than they expected,” Claure said in a phone interview yesterday. “We decided to make it easy and double whatever is in the market. This is the best offer ever in the marketplace.”

Boosting Subscribers

The promotional plans will be available for purchase starting Aug. 22 through Sept. 30. The limited-time offer for new customers waives an access fee of $15 a month per line through 2015 and offers an extra 2 gigabytes of data per line for free. Claure said the “Framily” will no longer be offered after the end of this week.

“This is just the beginning,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo, said. “There will be more price cuts to come, and I expect T- Mobile will fight back, as well.”

Rivals aren’t standing still. As Sprint unveiled its new prices, Verizon cut the fee of its single-line, 2-gigabyte plan by 20 percent to $60 a month.

Shares of Sprint fell 4.1 percent to $5.39 at the close in New York. Bellevue, Washington-based T-Mobile rose less than 1 percent to $28.95.

With Claure vowing to be aggressive on price and data allotments, analysts braced for a more challenging wireless market.

Mike McCormack, an analyst at Jefferies & Co., cut his price target on Sprint to $4 from $7. While Sprint’s new offers are rational, the company’s network quality lags the other carriers, McCormack wrote in a research note.

Worst Network

Sprint has the worst overall network quality of the four national carriers, according to a report today by RootMetrics. That same report gave Verizon top honors and hailed T-Mobile as most improved.

Claure is racing to upgrade Sprint’s network and incorporate some of the new airwaves it acquired with its Clearwire Corp. takeover last year. Sprint has the capacity it needs and is making improvements that will help it gain an edge on larger rivals, according to Jennifer Fritzsche, an analyst with Wells Fargo & Co.

“Sprint is using its rich spectrum position and thick pipe to hit hard at the competition,” Fritzsche wrote in a research note.

Cost Cuts

Sprint’s new CEO is charged with helping attract subscribers after his predecessor, Dan Hesse, lost monthly customers every year since 2007. Claure’s appointment was announced this month as Sprint scrapped a plan to buy its smaller rival.

“We heard a pretty loud message from the government that they weren’t ready for consolidation, so we had to focus Sprint on growth,” Claure said. “It’s no secret we have been losing customers and that we have an uneven cost base. We are going to run this company to get back to growth.”

In his first day on the job last week, Claure told employees to expect cost cuts and a more vigorous competitive edge. Yesterday, Claure said Sprint needs to have the lowest cost of service in order to deliver the best value to customers.

Leaner Sprint

“To do that, we started a comprehensive review looking at every dollar that is spent, and if there are things that don’t make sense, we will cut them fast,” Claure said. “I come from a low-cost industry, and I’m going to try to apply some of that methodology.”

He didn’t say whether he would cut jobs or the areas where he would reduce costs. He did say the objective was to make Sprint lean.

Sprint is offering a limited-time promotion to buy out a family’s contract on another service for as much as $350. Claure said there will be more news later this week about pricing plans for individuals.

Without the limited-time offer, a customer would pay $250 a month for 10 smartphone lines and 20 gigabytes a month. A family with four smartphones would pay $160 a month for 20 gigabytes, double the amount of data AT&T offers at the same price. Prices vary depending on the amount of data shared between a family and the amount of phones, tablets and other data devices in use.

‘Street Fighter’

SoftBank, which owns about 80 percent of Sprint, is counting on Claure to help return the U.S. wireless carrier to growth. Earlier this month, Son said he chose Claure, who joined Sprint’s board in January, because of his entrepreneurial spirit.

“Marcelo, a street fighter, has enlarged Brightstar from zero to a wholesale firm crossing more than 100 countries,” said Son, who acquired control of Brightstar last year. “When he came to the U.S., he had only $100 in his pocket and then he made a company with sales of 1 trillion yen. In that sense, he is the street fighter.”

Claure’s predecessor, Hesse, joined Sprint after its disastrous $36 billion merger with Nextel Communications Inc., which led to service disruptions that cost the combined company millions of subscribers and forced it to cut back on investments to add cash to the balance sheet. Sprint ended up writing off about $30 billion, or 80 percent of Nextel’s purchase price.

“Dan did a phenomenal job of taking Sprint through some difficult times with not a lot of financial backing,” Claure said. “Sprint was on the verge of bankruptcy. That wasn’t shared with a lot of people.”

#Framily #Fruneral

T-Mobile CEO John Legere, who was said to be in line to lead the combined Sprint and T-Mobile, criticized Sprint’s announcement in a series of Twitter Inc. postings yesterday, including “Hmm ... it’s the end of #framily! I’ll be sure to send some #flrowers to the #fruneral.”

Claure said Legere has done a good job of getting T-Mobile, the No. 4 wireless carrier, back in the game, though Claure said his own management style is different because he likes to let his actions do the talking.

Son’s SoftBank Corp. also said yesterday it will begin selling a smartphone it developed with Sharp Corp. in the U.S. and Japan. The Aquos Crystal device to be offered through Sprint, SoftBank, Boost Mobile and Virgin Mobile uses Google Inc.’s Android software. SoftBank and Sprint also will start service for 4G smartphones allowing unlimited downloads of certain apps for a fixed price, according to a statement.

Sprint’s Virgin Mobile and Boost Mobile prepaid units will offer the Aquos Mobile for $149.99, and Sprint customers can get it for 24 monthly payments of $10.

© Copyright 2014 Bloomberg News. All rights reserved.

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