Sprint targets prepaid users to reduce churn

Sprint (NYSE: S) is aiming to reduce churn by converting prepaid users into long-term postpaid subscribers, CFO Tarek Robbiati said today.

"The market is highly penetrated. It's almost saturated here in the United States," said Robbiati at an investor conference. "The essence of what we have to do here is to really segment our customer base more than ever before."

Prepaid users generally fall into one of three categories, Robbiati said, adding that Sprint has tightened its credit policies for postpaid users over the last 15 months. Some will always choose prepaid, some have credit problems, and others are young and hoping to establish a credit history.

The key, he continued, is to target the right prepaid users with customized offerings to lure them to more lucrative postpaid plans.

"This is very scientific, and you cannot treat every customer on an indiscriminate basis," Robbiati said. "You really have to look at every customer and develop programs to upsell them over time…. They would like — some of these customers would like — over time to build up a billing relationship with their carrier. And we would like that, too, because it's an opportunity for us to upsell them into new products and services."

That won't happen overnight, he conceded, but it's a necessary strategy in a market where smartphone growth is slowing and new postpaid users are increasingly scarce.

"It's not something that you will see unfolding necessarily just by one quarter," Robbiati explained. "It's a long-term picture about how we go and target customers in a market that is increasingly saturated."

Robbiati, who joined Sprint as CFO in August, also continued his drumbeat of reducing costs to turn Sprint's finances around.

"The priority is pretty simple," he said of Sprint's strategy for 2016. "It's cost cuts, cost cuts, and then cost cuts. We simply have to stop doing things that make no sense."

Indeed, The Kansas City Star reported Friday that the carrier has already begun slashing jobs as part of a larger effort to trim $2.5 billion from its budget. Sprint gave no details regarding the job cuts, according to the Star

For more:

- See this Sprint webcast

Related articles:
Sprint CFO: Customers now on LTE 90 percent of the time
Sprint's 50 percent off promotion divides financial and industry analysts
Sprint's Robbiati: We can cut $2B in operating expenses, $500M on equipment spending