Sprint’s new offer of a free year of unlimited service to users who switch carriers may not be the bombshell it appears to be, according to analysts.
But it also isn’t great news for carriers that are already competing in a cutthroat market.
The nation’s No. 4 mobile network operator quietly launched a campaign yesterday that dangles a free year of unlimited talk, text and data to customers who switch from Verizon, AT&T or T-Mobile. The deal is available through June 30 for up to five lines for users who bring their own handsets and SIM cards.
The move certainly ups the stakes in an extremely competitive space where unlimited data has become a universal offering. Craig Moffett said the campaign “is arguably the most aggressive promotion in the history of the U.S. wireless industry,” warning that “customers could sign up in droves.”
And the tactic could be a strategy for Sprint to claw back customers in a second quarter that might have proven to be especially difficult, Matthew Niknam of Wells Fargo Securities wrote.
“For Sprint, the promotion reflects a potentially challenging quarter for postpaid net adds, especially given less switching activity and a more aggressive stance from Verizon (full quarter of unlimited),” Niknam wrote in a note to investors. “We also note gross add trends may have been further impacted by the recent Radio Shack bankruptcy, as Sprint converts better performing locations to company-owned stores. This backdrop, Sprint’s goal of improving postpaid phone net add performance year over year in fiscal year 2017, and a more open stance towards reinvesting cost savings may shed some light on why Sprint launched this promotion.”
Indeed, Sprint executives noted the high costs customer acquisition incurred during more traditional promotions. It can take a year of service or more for a carrier to break even on a customer acquired by traditional marketing means, Sprint said, while the latest promotion won’t be advertised on TV or through other expensive channels.
And other factors are likely to dampen the effects of Sprint’s “free unlimited” campaign, Jeffrey Moore of Wave7 Research observed. The deal is limited to online signups—indeed, there seems to be no in-store signage and little knowledge of the offer by brick-and-mortar staffers—and it’s available only to users with one of several specific handsets.
“No detailed quantitative analysis has been conducted, but it appears that a minority of Verizon and AT&T smartphone customers will have eligible phones,” Moore wrote in an update to subscribers. “A small minority of T-Mobile customers—likely less than 25%—have eligible phones.”
Regardless, the campaign “appears to be an incremental setback” for carriers, Deutsche Bank’s Niknam wrote, and will likely have the most impact on T-Mobile and Verizon. And it could provide a lift to tower companies as yet another unlimited offering comes to market that could further spur data consumption.
“Among a tougher industry backdrop for carriers (where ‘unlimited’ is the new normal), we think infrastructure players (primarily towers, as well as fiber operators) as best positioned to monetize rising network investment,” Niknam wrote. “While we maintain a positive view on all three tower stocks, American Tower and Crown Castle are our preferred ideas.”