Sprint's Virgin targets T-Mobile with $100 credit to switch

Sprint Nextel's (NYSE:S) Virgin Mobile USA prepaid brand is offering T-Mobile USA customers $100 to switch over to Virgin's no-contract service. The action is a response to T-Mobile's new no-contract business strategy.

According to Virgin, its plans cost $334 less than T-Mobile's plans over two years.

Virgin said that T-Mobile customers who switch their existing T-Mobile number before May 31, activate a new phone and make a payment by May 31 will get a $100 service credit on their account within the first 30 days of switching.

Virgin argues that its "Beyond Talk" plan at $55 per month offers a better value than T-Mobile's comparable $60 per month "Simple Choice" plan. Virgin said that, after reaching 2.5 GB, Virgin customers are throttled down to CDMA EV-DO data speeds, not 2G data speeds as with T-Mobile. In February Sprint began offering LTE service and smartphones through Virgin and its Boost Mobile brand. 

However, smartphone mobile hotspot functions are included in T-Mobile's monthly bill and on Virgin mobile hotspot functions cost an extra $15 per month (but Virgin adds an extra 1 GB).

Virgin Mobile has emphasized that it has offered a no-contract option far longer than T-Mobile, and has dismissed T-Mobile's claim that it is "revolutionizing the industry." T-Mobile no-contract offering could put pressure on Virgin and other prepaid and no-contract players.

Sprint's LTE network now covers around 100 million POPs, a target T-Mobile expects to hit by mid-year. Both carriers expect to have 200 million POPs covered with LTE by the end of 2013. 

T-Mobile's Simple Choice plans start at $50 per month and come with no annual contract or traditional device subsidies. Customers can either buy their smartphone outright for the full cost of the device or they can make a down payment and then pay for the remainder of the cost of the device in monthly installments. Additionally, customers can bring unlocked devices to T-Mobile.

For its part, T-Mobile is brushing off the criticism and targeting from Virgin Mobile. "We're not worried about it," said Andrew Sherrard, senior vice president of marketing for T-Mobile, in an interview with CNET. "Between the network, plans, and devices, we feel good about what we've got. There's no need to respond."

Sherrard and David Carey, T-Mobile's executive vice president for corporate services, told CNET that T-Mobile's new plans are generating momentum and excitement among customers and increasing traffic to T-Mobile's stores. "I have every reason to believe this momentum will continue and carry forward," he said, but he noted that it was too early to tell how well the plans are doing in the market.

T-Mobile's biggest hurdle will likely be convincing consumers that it is better for them not to be locked into a contract, which many customers are used to. Analysts have noted that T-Mobile's monthly device payment plan acts as a kind of contract.

"We realize this new construct would take a conversation," Carey said. "We had to talk about how different it was, and where the benefits are. When something is new and different, it'll take time for clarity to come by."

For more:
- see this Virgin site
- see this CNET article
- see this AllThingsD article
- see this separate CNET article

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