Sprint's Hesse: We're testing plans that could drive more equipment installment sales

Sprint (NYSE: S) CEO Dan Hesse said the carrier is testing a variety of new pricing options, including plans that could spur more customers to pay for devices through equipment installment plans.

In an interview with FierceWireless, Hesse expanded on his comments during Sprint's second-quarter earnings call, in which he confirmed that the carrier is trialing new rates plans in certain markets to determine if it should introduce more competitive pricing nationwide.

"All options are the on the table," he said. "We're testing a variety of different [pricing] structures across the country." The trials only started in mid-July, so it's still too early to draw any conclusions, he said.

Other carriers, notably T-Mobile and AT&T, have been aggressive in pushing device financing programs. Indeed, AT&T said half of all of its smartphone sales in the second quarter were through its Next program, up from 40 percent in the first quarter (or 35 percent when taking out accelerated upgrades). Verizon said the percentage of customers using its Edge upgrade plan increased to 18 percent in the second quarter, from 13 percent in the first quarter.

Under Sprint's Easy Pay option, which it launched in January, customers can pay for a device over 24 monthly installments. Customers can upgrade to a new device after 12 consecutive payments.

In the second quarter, Sprint said 28 percent of customers who bought postpaid devices selected Easy Pay, compared to 29 percent in the first quarter. Hesse said that the decline in the interest in Sprint Easy Pay is because postpaid customers "have been conditioned" to accept the subsidized phone "and it will take a while to get as comfortable with Easy Pay or installment billing."

Hesse also said the adoption of installment programs comes down financial incentives--for example, customers who choose to finance the cost of their device through AT&T's Next program get access to the carrier's discounted Mobile Share Value pricing. "It's something we're looking at as well in the trials," Hesse said, adding that Sprint is trying to find out "what would be more attractive to customers to get more of them" to embrace installment billing.

Hesse said Sprint will return to positive postpaid subscriber additions in the fourth quarter. He indicated that the fourth quarter is a major selling season for carriers and usually brings in the most gross subscriber additions, which potentially could offset any rate plan changes. Hesse said no timeline has been set for any rate plan changes.

Interestingly, analysts believe Sprint is tweaking its expectations for the remainder of the year. "On its 1Q14 call, Sprint indicated that net adds should be positive in 2H14," wrote Credit Suisse analysts in a research note. "The company seemed to move away from this guidance on its 2Q14 call, specifically pointing to potentially positive net adds in 4Q14.  The improvement in churn appears like it will take longer than we expected."

Hesse also discussed Sprint's LTE network and its Network Vision network modernization program. He said the carrier has completed the work on roughly 95 percent of its cell sites. He said Sprint will expand beyond the 254 million POPs it currently covers with LTE, but has not yet set a target or a timeline for that work. "We haven't said what that [target] will be," he said. "The top priority is to get to high levels of POP coverage in 2.5 [GHz spectrum]. Our POP coverage numbers will go up on the 1.9 [GHz spectrum] but not substantially. It's one of the things we'll evaluate over time."

Hesse also discussed T-Mobile US (NYSE:TMUS) CEO John Legere, who used to work under Hesse at AT&T. Legere has been rumored to be the person who would run a combined Sprint/T-Mobile if their rumored merger is approved. However, Legere has also launched sharp barbs at Sprint and other competitors on Twitter.

"John's a character. I've known John for a long time," Hesse said, adding that he will not get a Twitter account of his own to fire back at Legere. "I don't think I could keep up with him on Twitter. John's his own guy with his own style. He's a character and a personality. We're friends, we go way back."

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