Sprint (NYSE: S) wholesale partner nTelos Wireless felt that it needed to follow larger carriers by offering a device installment plan, but the company intends to make its offering compelling in terms of price and value, according to an nTelos executive.
The carrier disclosed earlier this month that it plans to launch an installment plan later this summer. Craig Highland, the carrier's senior vice president of finance and corporate development, said nTelos is being a fast follower after seeing how well received EIP (equipment installation plans) offerings have been at carriers like T-Mobile US (NYSE:TMUS).
"It kind of solidified that consumers are looking for that type of plan, a $0 out the door type of offering," Highland said in an interview with FierceWireless. NTelos "saw that this type of program was attractive to customers and had staying power."
NTelos CEO James Hyde said earlier this month that not having an installment plan during the fourth quarter and the first quarter "has hurt us." Highland declined to discuss exactly how the plan will work, but he said in most respects it will be similar to other installment plans, which typically let customers pay $0 down for a device and finance the cost of the phone over the course of 20 or 24 months, with a chance to upgrade after 50 percent of the device cost has been paid or after 12 monthly payments.
"The mantra or way we look at most everything is: it has to be simple, it has to provide service to our customer, and there has to be a savings element as well," Highland said in explaining how nTelos is thinking about its installment plan. He said the company "will be offering something that is competitively priced" to the national carriers, U.S. Cellular (NYSE:USM) and other regional carriers.
The installment plans will give nTelos' sales force another tool to go after new customers or retain existing customers, Highland said. He added that a "large, cross-functional team" inside the company is working on the plan, including workers from the company's IT, billing, marketing, sales and finance departments.
"The big thing we don't want to do is rush something to market without proving it out" or having enough resources to meet demand, Highland said.
Tier 1 carriers have increasingly embraced such plans, which shift revenue from service revenue to equipment revenue by removing the up-front cost carriers pay to subsidize smartphones. AT&T Mobility (NYSE: T) noted in its first-quarter earnings that the adoption rate of its Next handset upgrade program was 35 percent in the period. Verizon Wireless (NYSE: VZ) said the adoption rate of its Edge upgrade program in the first quarter was less than 15 percent but the company expects that to potentially double into the second quarter with the launch of Edge in Verizon's indirect channel.
Interestingly, Highland said nTelos will not follow AT&T's Cricket prepaid brand by offering financing options on prepaid phones. Cricket's offerings include an interest-free plan, a 29.99 percent APR plan with six months deferred interest, and a 12-month leasing plan.
"Our focus right now would be on the postpaid type customer," he said. Highland added that "getting into a true financing" model brings added complexity, including complying with various state laws on financing. Financing for prepaid customers "would definitely be something decided on later."
In terms of a service price discount, Highland said "competitively, we will have something similar to that as well."
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