Sprint Prepaid loses retail shelf space in advance of Virgin relaunch

Sprint is rapidly losing prepaid customers, and its self-branded prepaid phones are disappearing from retail stores as the carrier prepares to relaunch its Virgin Mobile brand in an effort to boost sales in that market.

The beleaguered operator lost a net 264,000 prepaid users during the latest quarter, down drastically from the 546,000 net additions Sprint reported during the same period last year and substantially worse than Evercore ISI's estimate of 100,000 net losses. CEO Marcelo Claure attributed those losses to an increasingly competitive prepaid market and Sprint's decision to focus on more lucrative users.

"However, it is important to understand that we did create positive value contribution from our prepaid segment in the quarter as a result of our profit-based approach, as our higher margin Boost brand did have positive net additions in the quarter and for the full year," Claure said during a conference call with analysts. Claure addded that Boost customers accounted for a bigger share of Sprint's prepaid base year over year.

That may explain why nation's fourth-largest carrier appears to be de-emphasizing its own branded prepaid service in favor of its dedicated prepaid brands. Wave7 Research reported this week that Sprint Prepaid was pulled from Target in February and from Best Buy in April. A FierceWireless check revealed no Sprint Prepaid phones are currently offered through Target's website, and four of the five Sprint Prepaid phones offered on Best Buy's site are on clearance.

Wave7 noted that Sprint Prepaid is still available at Sprint's retail outlets as well as RadioShack and Kmart.

A Sprint representative declined to comment on the matter specifically but said the carrier still considers prepaid a top priority and is looking to grow the business. Indeed, Sprint clearly remains active in prepaid: Earlier this week it said it will merge its Assurance Wireless brand with Access Wireless (operating the i-wireless brand) in a tie-up of Lifeline service providers. And Claure said during Tuesday's call that the carrier is preparing to relaunch Virgin, which has been overshadowed recently by the Boost brand.

"While our losses were in areas we are de-emphasizing such as pay-as-you-go space, we're also in the process of relaunching our Virgin brand this year with a much stronger value proposition," Claure said. The Assurance/i-wireless merger "allows Sprint to focus on our core prepaid brands, Boost and Virgin," he continued.

Virgin is "going through a transformation," Claure said during a follow-up call with reporters, and will be "a very different carrier than it used to be" when it relaunches sometime in the second half of 2016.

It's worth noting that Sprint made some substantial changes to Virgin just three months ago, updating its pricing plans and discontinuing two sub-brands in an effort to target "more engaged, higher-ARPU subscribers." It's unclear whether a new Virgin will be an extension of that effort or a complete overhaul.

Verizon is largely ignoring the prepaid market, choosing to view TracFone as its vendor of phones and services for that segment. But T-Mobile and AT&T continue to chase that market with their MetroPCS and Cricket brands, respectively. Sprint will be challenged to grab market share in a prepaid space that has grown increasingly competitive in recent months.

For more:
- see this Sprint earnings call transcript

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