Analysts: Sprint's new shared data plans not disruptive enough to change its fortunes

Sprint (NYSE: S) made its first bold move under new CEO Marcelo Claure, introducing shared data plans that offer double the data of similarly-priced plans from Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T). However, financial analysts said that while the new plans could put pressure on Sprint's rivals, they were not truly disruptive and were unlikely to catapult Sprint back to growth in the short term.

Under Sprint's new plans, called Family Share Pack and available starting Aug. 22, customers can buy a subsidized smartphone with a two-year contract and are charged $40 per month per line. If customers purchase their phones in installments with Sprint's Easy Pay upgrade program, the access charge for smartphones is $25 per month for plans with less than 20 GB of data, and $15 per month for plans with 20 GB or more.  Mobile broadband devices cost $20 per month to add and tablets cost $10 per month. All of the plans come with unlimited voice and texting.

Sprint noted that families can get a plan of four smartphone lines with 20 GB of data for $160, compared to 10 GB of data for the same price at AT&T or Verizon.

Additionally, from Aug. 22 to Sept. 30, if customers bring their number and activate their plans on the Sprint Family Share Pack, Sprint will buy out their families' contracts with a Visa Prepaid Card worth up to $350, mimicking an offer from T-Mobile US (NYSE:TMUS), though T-Mobile's offer has no end date. Sprint is also waiving the data access charge for handsets, tablets and mobile broadband devices on 20 GB or higher data allowances for up to 10 lines through the end of 2015. However, there are several caveats to the offer. The switching offer will only be available at Sprint stores and Sprint Telesales. Customers must switch their number from another carrier to Sprint and must purchase their devices in monthly installments with Sprint Easy Pay.

Sprint is also offering a promotion from Aug. 22 to Sept. 30 that offers a family with up to 10 lines 20 GB of shared data for only $100 per month through the end of 2105, plus an extra 2 GB per line for up to 10 lines. Sprint noted that is $60 cheaper than AT&T and Verizon's plan for four lines, and more than double the data of similar plans from Verizon, AT&T and T-Mobile.

The plans will essentially replace the Framily plans that Sprint introduced earlier this year. Sprint will continue to allow customers to add subscribers to their Framily plan, but Sprint will stop marketing the Framily plans.

Claure said in several interviews that the new plans would help Sprint get "back in the game" with wireless customers. "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 told Bloomberg. "We decided to make it easy and double whatever is in the market. This is the best offer ever in the marketplace."

Claure also said Sprint would reveal new plans for individual subscribers later this week. However, family plans have become more competitive and carriers like to emphasize them because they are in general "stickier" and lead to lower churn, especially for postpaid customers.

A key issue for Sprint is that while it may be targeting heavy data users with the new plans, its network performance is not up to par with those of its peers, according to a new report from independent network testing firm RootMetrics. Sprint placed last among the four Tier 1 carriers in overall national performance, data performance, network speed and call performance. The company came in third on reliability and texting performance. Sprint is trying to remedy that through the completion of its 3G CDMA network upgrades as well as the rollout of Spark, its tri-band LTE service, which Sprint says delivers peak data speeds of 50-60 Mbps right now and will deliver 100 Mbps by the end of the year through two-carrier aggregation on its 2.5 GHz TD-LTE service. However, Spark is only available in 28 markets right now, though Sprint aims to cover 100 million POPs with Spark by the end of the year.

"While the data packages are attractive, we believe that they will have a limited market impact until Sprint has a more competitive network offering," New Street Research analyst Jonathan Chaplin wrote in a research note.

Others agreed: "However, it's unclear whether a 4-line AT&T or Verizon customer (to  the extent that they exist) will move if they don't even use the 10 GB  that is included in their current plan AND have concerns about Sprint's  network," wrote BTIG analyst Walter Piecyk. "Being offered double the amount of data when the network is slower and doesn't work near your house is not a concept that is lost on the educated consumer."

Further, Sprint's competitors have recently taken steps to insulate themselves from any pricing changes. T-Mobile recently changed its family pricing, and under its new plans the first line costs $50 per month, the second line costs $30, lines 3-6 cost $10 each and lines 7-10 cost $20 each. And Verizon recently launched a new plan for individual subscribers that offers unlimited voice, texting and 2 GB of data for $60 per month, $30 cheaper than a similar plan on its shared data plans.

Analysts said Sprint's new plans might help the carrier, but won't cause much disruption in the market.

"The new plans are materially lower than Sprint's previous pricing, but they fall short of the shock-and-awe cuts that some had expected," MoffettNathanson analyst Craig Moffett wrote in a research note. "Sprint's prices under Family Share Pack are now meaningfully lower than Verizon's or AT&T's at most usage levels, and they are dramatically lower than any of their competitors at very high usage levels. But they are still not quite as low as T-Mobile's at most data consumption levels, and, perhaps more importantly, their lowest prices are still not available to existing subscribers."

Chaplin added: "Given that this price cut was only a modest discount to where TMUS is, this move falls short of 'truly disruptive.' And while the marketing message of '$100 for 20 GB' is compelling when compared with AT&T's lead offer of $160 for 10 GB, the actual user experience may disappoint as Sprint catches up on network performance. As such, we continue to expect only a modest recovery for Sprint."

Meanwhile Credit Suisse analysts Joseph Mastrogiovanni and Michael Baresich wrote that AT&T could be the most insulated from Sprint competition because AT&T allowed customers to move to lower-cost Mobile Share Value plans when coupled with unsubsidized devices, which drove record-low postpaid churn in the second quarter.

"Additionally, competition from T-Mobile should have removed most of the low hanging fruit," they wrote. "T-Mobile has been the value leader over the last 12 months. While this positions it well against Sprint, it also implies that T-Mobile has a base that is attracted to value."

They noted Verizon could be at the highest risk because lower pricing via its Edge handset program was not extended to existing customers, and that historically customers who have switched between carriers have gone to another carrier with the same underlying technology, and Sprint and Verizon both share CDMA networks. However, they added that "mitigating factors for Verizon include its recently launched single line pricing that was extended to current customers and that its low hanging fruit has also been picked."

For more:
- see this release
- see this Re/code article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article 

Related Articles:
T-Mobile's family plans now support up to 10 lines
Verizon undercuts AT&T with $60 plan for unlimited talk, text and 2 GB for individuals
Sprint's Claure reportedly plans 'very disruptive' pricing changes for next week
T-Mobile trumpets $100 family plan to undercut AT&T, Verizon and Sprint
Lowenstein's View: Memo to new Sprint CEO: How to turn things around
Sprint's Claure intends to cut costs, compete aggressively on price
Sprint CEO Claure takes the reins with great expectations - and challenges - ahead

Read more on