Sprint could gain 17K subscribers in Q3 for Virgin's free year of service

iPhone 7 (Apple)

Analysts are predicting that Sprint will add 17,000 prepaid customers in the next quarter for its Virgin Inner Circle plan—which offers a year of unlimited data for $1 per year.

The plan is for new customers who buy an iPhone, or for current Virgin users who upgrade to the Apple device (it’s $50 per month after the initial one-year promo period). The deal is meant to solidify Virgin’s recently announced iPhone-only strategy, while diversifying Sprint’s prepaid business. And according to Wall Street analyst firm Jeffries LLC, it’s a solid plan.

"Sprint recently introduced free year of service offer for switchers (BYOD); though just 1% of gross adds thus far, that would equate to an estimated 17k net add benefit in 3Q if that uptake rate continues,” the firm said in a research note.

Sprint recently extended the signup period for its Virgin Inner Circle offering for another month, to Aug. 31, with executives during its recent earnings call pointing to the model as an experimental success for its prepaid and digital strategies.

According to Jeffries, prepaid will have an important role to play as the U.S. wireless market continues to be hypercompetitive, even though there has been lower churn across the industry thanks to promos and other deal offers that are wooing no-contract customers over to subscriptions.

“Against the backdrop of increased competition and industry maturity, the recent quarter surprised, with industry handsets coming in above expectations,” the analysts said. “However, gross adds were surprisingly better, which begs the question: Where are these subscribers coming from? Some theorize that prepaid migrations could be a factor in the postpaid momentum, though results do not fully support this view.”

To wit: “While prepaid gross adds dropped more than in prior years, churn also came down, resulting in 415,000 prepaid net adds (the 6th consecutive quarter of 400,000-plus adds).”

There’s no word on whether customers might flee in droves after their initial $1-per-line per year is up—Virgin Mobile’s standard $50 per month per line is undercut by other prepaid offers—but for now, the promotion looks to give Sprint positive headwinds for Q3.