Sprint introduced a relatively complex new leasing program aimed at users who need to build their credit or can’t pay top dollar for a new, high-end smartphone.
Sprint Flex Deals, as one offering is dubbed, enables users who’ve applied for and received credit with Sprint to pay $25 down and $5 a month for entry-level devices, or to pay $30 down and $10 a month for a more expensive device from the carrier's entire portfolio. Customers can upgrade their device after a year at no charge, or for $5 a month can choose an annual upgrade option for any other new device.
The annual upgrade option was previously available only for the iPhone and Samsung Galaxy handsets.
After 18 months, users have more options: They can return their phone and upgrade to a new one; they can pay off the phone in one lump sum; or they can purchase the device over six more monthly payments, with previous payments counting toward the purchase price. Customers may also opt to continue to make monthly payments and maintain the lease.
A second offering, dubbed Sprint Forward Deals, enables customers to build their credit with Sprint and qualify for a free upgrade to any new phone after 12 consecutive, on-time monthly payments. Those upgrades don’t require a credit check.
“Sprint Flex is the ultimate option for consumers who want the latest device at our most competitive prices with maximum flexibility,” Sprint CEO Marcelo Claure said in Sprint’s announcement. “Sprint Deals goes one step further, giving price-conscious consumers incredible offers and the option to upgrade to the latest phones every year.”
The move is clearly an effort to attract new customers—even those with significantly limited budgets—in an ultracompetitive market that has reached saturation. But the model also gives Sprint, which has pursued the leasing model more aggressively than its rivals, an opportunity to decrease churn, as Claure said several weeks ago.
“I mean, as a value proposition, 80% of our sales give the right to the consumer to upgrade their device very single year. So logically that’s going to drive consumers to one-year upgrades,” Claure said at an investors conference in May, according to a Seeking Alpha transcript. “They’re signing an 18-month lease, but they are upgrading their device every 12 months, meaning they are never out of the contractor. They are continuously operating, and what we’ve found is the churn profile of those customers looks very, very favorable.”
Additionally, leasing phones—which, of course, requires users to return their devices to upgrade or at the end of the lease—enables the operator to sell or lease it again on the secondhand market, Sprint CFO Tarek Robbiati said in March. And the worldwide market for refurbished phones is gaining momentum as growth in the overall smartphone segment has slowed.
"The only reason why anybody would lease anything is because we see multiple lives for a particularly asset,” Robbiati said in a second Seeking Alpha transcript. "We call them pre-loved phones and they are gaining traction amongst consumers who are buying those phones either online, but they are better off buying them from one of our dealers or one of our shops with a guarantee from either ourselves or the manufactures and this is starting to gain traction.
“So, you do leasing because you see that you can monetize an asset multiple times over its life,” Robbiati continued. “Maybe two lives for a phone, maybe three we don’t know. But those phones have an extended life relative to what we were using in the past.”