If it sounds too good to be true, it probably is. Yesterday, Sprint caught the attention of numerous wireless subscribers with its “Cut Your Bill in Half” promotion. The United States’ third-place wireless provider promised AT&T and Verizon Wireless customers that it would cut their bills in half if they made the switch to Sprint.
The promotion, however, was loaded with caveats with the biggest one being that you had to trade in your existing smartphone to Sprint with no compensation in return. In addition, customers that don’t handover their current smartphone within 30 days are hit with a $200 charge per line.
It’s this part of the promotion that makes it a profitable venture for Sprint. Customers have to obtain a new phone using either Sprint Lease or Sprint Easy Pay, which of course will add quite a bit to your monthly bill.
Joe Euteneuer, Chief Financial Officer for Sprint, admitted at the Bank of America Merrill Lynch Leveraged Finance Conference that the actual cost savings that customers will see on their monthly bill would be much lower than 50 percent. “So net-net they are still probably getting a 20% sort of net discount. So it's a great value creator.”
Interestingly enough, although the 50 percent service discount sounded good at first, Euteneuer explained that some of its currently available plans might provide better cost savings.
“When you look at the comparable rates, I think a lot of them are going to find out that going to some of our existing plans might even be better than cutting your bill in half,” Euteneuer added.
Euteneuer also went on to explain why T-Mobile wasn’t singled out in the promotion. We already know that T-Mobile has some pretty aggressive pricing when it comes to its service plans, so it probably wouldn’t be in Sprint’s best interests to try halving those plans. But the real reason is that AT&T and Verizon Wireless together account for 75 percent of the wireless market in the U.S., which gives Sprint a pretty big pool to draw from. “The majority of the prime customers out there are sitting there.”
But Euteneuer was also humble about his company, which ousted Dan Hesse as CEO in August in favor of Marcelo Claure. “The whole idea is to attract people back into our stores, to get an opportunity to talk to them about the benefits of the new network, these tri-band phones, and getting them to experience something that over the past 18 months was maybe not the best experience.”
So do you think that Sprint has made enough improvements to its network to warrant handing over your existing smartphones accepting a 20 percent monthly discount?