Sprint Nextel today ups the ante in the wireless wars.
Reeling from a poor financial performance in 2007 and projecting another bad year, Sprint is trying to lure cord cutters, cell phone junkies, business professionals and other high-dollar wireless customers.
In the process, Dan Hesse, Sprint Nextel’s chief executive, is hoping to take the uncertainty out of monthly wireless bills.
The company today begins offering two new unlimited service plans offering more value for the money than those unveiled by their competitors.
A $99.99 “Unlimited Everything” plan includes voice calls, text messaging and a laundry list of Internet-based data services. An $89.99 “Talk/Message/Connect” plan offers unlimited voice calls and text messaging, but charges extra for access to the Internet or other data services.
The rates undercut competitors AT&T Wireless, Verizon Wireless and T-Mobile by as much as 40 percent. None of those companies offers unlimited access to the rapidly growing wireless data market, which includes services as diverse as phone-based TV and turn-by-turn navigation.
Hesse called the Sprint plans “bold” and “unprecedented.”
“To us, this is the beginning of a new era in wireless,” Hesse said.
According to surveys by organizations ranging from Consumer Reports to the University of Michigan to AARP, problems with mobile phone bills are one of the leading consumer complaints nationally.
After selecting plans that provide a set number of minutes for a set price, customers complain that add-on charges for navigation, Web browsing and text messaging bulk up their bills.
“Wireless today is about much more than just voice,” Hesse said. “It is about data services — texting, e-mail, video, pictures, music, navigation, surfing the Web and more. Customers want these applications, but without complexity and without having to worry about their bill.”
Wall Street, however, was less than impressed.
“I’m not seeing anything here that’s going to change the trajectory much,” said Timothy Horan, an analyst with Oppenheimer & Co.
Horan noted that T-Mobile has a plan that offers 1,000 minutes of talk, 1,000 text messages and e-mail for $55.
John Garcia, Sprint’s acting chief marketing officer, said services offered by Sprint and T-Mobile aren’t comparable.
“They are still in a fairly slow network and their data offering is primarily just text and e-mail,” Garcia said during a call with investment analysts. “And anything else you try to do is, like I said, slow.”
Some type of move by Sprint on unlimited calling plans was expected. The company’s three leading rivals announced unlimited service plans last week.
The announcement was the lone positive note Thursday in a cacophony of bad news released as the Overland Park wireless company announced its quarterly and annual financial reports.
Sprint wrote off $29.7 billion in the fourth quarter and said the company will lose 1.2 million postpaid customers during the first three months of this year.
Hesse said Sprint’s plan differentiates the company from its competitors while offering customers simplicity.
In some ways, Hesse is going back to the future.
While with AT&T’s wireless division in 1998, Hesse introduced one-price calling for cell phones, eliminating different charges for local and long distance calls. At the time, consumers were charged extra for cell phone use outside their home region or for long distance calls.
Before the plan was introduced, Hesse said, only about 16 percent of wireless consumers regularly used their phone in areas that would bring extra roaming charges.
“We penalized any customer who actually wanted to use the mobility function,” he said. “You didn’t take your cell phone when you traveled and you didn’t make long distance calls on your cell phone. The market was small because the wireless industry made sure it was small.”
The plan to standardize rates is a whole new revolution, Hesse said.
“At our rates, we feel we have struck a very healthy balance between fiscal responsibility and a broader reach, which will grow the wireless data market,” Hesse said.
William Power, an analyst with Robert W. Baird & Co., said the plan puts Sprint in a competitive position for the most lucrative customers. But, in a report to investors, he included a caveat.
“That is a relatively small piece of the overall market,” Power said.
Power noted that Wall Street had been concerned Sprint would start a wireless price war.
“On the whole, the pricing actions do not appear to be as aggressive as some had feared,” Power said. “The lack of a stronger lower-priced offering could be positive for the industry.”
Hesse conceded that only a small percentage of current customers are coughing up $100 a month for mobile phone service.
“It’s correct that today a small percentage of users spend $100 a month on wireless,” Hesse said. “But that could change. It could be that it’s because we make it difficult for users, or really very expensive, for users to use broadband capabilities on the phone.”
Roger Entner, vice president of the communications sector for IAG Research, applauded Sprint’s plan.
“It’s enough to give them differentiation, but not enough to make everybody freak out and start a price war,” Entner said.
Entner said Sprint’s plan also offers another benefit overlooked by other wireless companies in their unlimited plans — families.
Sprint’s plans give families a $5 incremental discount for each line on a family plan. A second line costs $94.99; a third, $89.99.
“It’s on the right path,” Entner said of the plan.
Sprint goes unlimited
$99.99
Unlimited voice and data, including texting, Web browsing, push-to-talk, navigation, TV, radio and other services.
$89.99
Unlimited voice calls, push-to-talk and texting, but no free access to other data services.
$89.99
Unlimited data, including texting, Web browsing, navigation, TV, radio, push-to-talk and other services, and 900 minutes of talk time.
$69.99
Unlimited texting and push-to-talk, and 900 minutes of talk time.
$49.99
Unlimited texting and push-to-talk, and 450 minutes of talk time.
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