Home - , , , , - Analysts Share POV on Sprint's Latest Virgin Mobile Announcement

Analysts Share POV on Sprint's Latest Virgin Mobile Announcement

virgin-mobile
Just yesterday, Sprint announced that they will no longer be focusing on its prepaid brand Virgin Mobile. Instead, they are looking at introducing a new strategy for the brand sometime in the future. With this announcement, many couldn't help but look at Sprint's struggle with their prepaid arm; especially since brands like MetroPCS and Cricket Wireless seemed to have bagged the prepaid market. Many even thought that Sprint would be folding the prepaid network.

Despite these, however, the company's CEO Marcelo Claure has reasoned that their decision to back away from the prepaid sector was because they wanted to focus on an area where they wanted to grow. And in a way, they are also keeping customers that matter for the business.

Immediately after Claure's announcement, T-Mobile took this opportunity to attract those customers under Sprint's Virgin Mobile brand to draw them into switching to MetroPCS. Taking to Twitter to express their sentiments, the company sent out a tweet that read "Hey @VirginmobileUSA customers, we think you matter! Get more value, a bigger, faster network, and two free phones!"

Announcement was no shocker to iSpot.tv
 
While this announcement may come as a shock to most people, analysts are no longer surprised by it. As a matter of fact, iSpot.tv has noted that the company did not spend any money on advertising Virgin Mobile on both third and fourth quarters of 2015 whereas they spent $1.6 million and $3.4 million on the first and second quarters, respectively. Yesterday's announcement hinted at the possibility of Sprint concentrating on promoting Boost Mobile this year. But based on the information gathered by iSpot.tv, this isn't the same as well. Last year, they spent $1.2 million during the third quarter and just $144,000 in the fourth quarter. Meanwhile, its competitors spent a whopping number for advertising. T-Mobile spent $19.6 million (third quarter) and $34.6 million (fourth quarter) for MetroPCS while AT&T spent $19.7 million (third quarter) and $63 million (fourth quarter) for Cricket Wireless.

Based on the the information released by iSpot.tv, there's no surprise why T-Mobile and AT&T has been aggressive with their success in the prepaid market. With their spending, these two companies have been able to add in new prepaid customers. T-Mobile had a total of 595,000 new prepaid customers in the third quarter. AT&T, on the other hand, added in 466,000 prepaid subscribers in the third quarter and 469,000 net prepaid customers in the fourth quarter. These numbers have increased compared to the ones they gained from the 2014.

This information could indicate that Claure has no interest in the company's prepaid customers. On the third quarter of 2015, he announced that subscribers from both Boost and Virgin will be moved to Sprint's postpaid plans. They offered a three-month period (which lasted until September 30, 2015) where tenured subscribers from both prepaid networks could receive a credit extension for their usage. But when the three-month period came to a close, about 175,000 subscribers participated and had their prepaid accounts migrated into postpaid from Boost and Virgin Mobile.

An analyst from 556 Ventures has noted that there has been a 2.3 percent decline of customers on Sprint's prepaid plans from 2013 to 2015. When Sprint's focus was on prepaid, things were different. And with the changes in the market, it has faced a number of competitors that were doing their best to outrank Sprint. Even though Sprint has placed second among prepaid carriers, the gap between them and T-Mobile has widened so much that they lost around 1.2 million subscribers in just the last three quarters, according to Jackdaw Research's Jan Dawson. Meanwhile, its competitors gained thousands. And with the option of equipment installation plans (EIP) offered by major carriers like T-Mobile and AT&T, the prepaid sector has become a tough market to conquer. With this option, customers are able to pay off their devices on a monthly installment instead of the traditional two-year postpaid contract. This has resorted to an aggressive prepaid market as there is no more real growth to it. Verizon saw this beforehand and decided to leave the prepaid brand rivalry to other carriers.

So what will Sprint do with its prepaid market?

It's important to remember that Sprint's prepaid arm consists of four different brands-- Boost Mobile, Virgin Mobile, Sprint Prepaid, and Assurance Wireless. All of these brands have a specific niche market and plans to offer for each customer. And from the start, they didn't have a clear strategy for their prepaid arm. As a result, they have endured a more fragmented strategy compared to other carriers.

A wise decision for the company was to consolidate the brands, which is probably what is currently happening as Sprint is shifting Boost Mobile into its main prepaid brand. Just yesterday, Sprint reported adding half a million new customers. Perhaps Claure's new strategy is working, but it could take some time before Sprint's prepaid can be as competitive as MetroPCS or Cricket Wireless. Well, at least not right away this year.


Source: Fierce Wireless

27 comments:

Comment Page :
  1. whooping number for advertising, whooping -> whopping

    ReplyDelete
  2. Sprint has some of the lowest prices, but for a reason. Their network is sub-par, but I don't mind. I just wish they where GSM and not CDMA.

    ReplyDelete
  3. Verizon Wireless should just buy Sprint and become the biggest in the US.

    ReplyDelete
    Replies
    1. Verizon is already the biggest US operator.

      The DOJ believes that the US needs four national mobile operators to foster competition. They blocked T-Mobile and Sprint merging so they would almost certainly block Verizon from acquiring Sprint.

      Analysts believe that if Sprint is acquired it will be by Dish, Charter, Comcast or possibly Google.

      Delete
    2. Dennis, its not IF Sprint will be acquired, its WHEN, and I have a feeling in the next 2 years at most.

      Delete
  4. If they made it easier to BYOD they could gain some traction. What is the purpose of putting so many hurdles in the way of people who want to purchase service?

    ReplyDelete
    Replies
    1. I agree. Sprint's crazy restrictions on what devices can activated where might have made some sense long ago as a way to channel users toward postpaid. But to still have so much friction in the activation process in today's BYOP world is just stupid.

      Delete
  5. This is your best blog so far, Christine. Good research and good editing. Keep it up!

    ReplyDelete
  6. Wouldn't combining Sprint Prepaid, Virgin & Boost...clearing all such labeled phones to activate on Boost be a genius move? Better than this micro/micra future Virgin network stuff, that just sounds so odd & distant from any kind of love. Why hasn't U.S. Cellular & Sprint gotten married yet?

    ReplyDelete
  7. The carrier that has one too many prepaid brands is no longer interested in the prepaid market. While other carriers find success in prepaid with just one prepaid brand each which have been on the market far less time than Boost or Virgin Mobile. The problem isn't the market, the problem is Sprint. This company needs to be acquired by someone that actually knows how to do business. The first thing the new owners need to do is install new leadership. Sprint is a perfect example of a business that deserves to go under.

    ReplyDelete
  8. Sprint could NEVER compete UP and UP with the other Big Boys in prepaid (Att, Tmobile and even Tracfone). They got up by picking on the smaller guys, when Cricket and Metro were regionals and cdma. That was the only way they could fight, go pick on those of a lesser class. And they did well for a while but with the OVERALL wireless near saturation and nowhere more to go in prices without making it one big writeoff, they are trapped. Unless they really get their stuff together, Cricket, Metro, Tmobile prepaid and Tracfone will eat them alive. They've NEVER been good at cohesiveness. Remember Clear and even the very short lived Rover prepaid braodband? Sprint has ALWAYS been a mishmash of conflicting technologies, cultures and ideas that make the whole less then the sum of its parts. Sprint has been trying to clear dead wood for over ELEVEN years. And they never have been able to get it together. 1)Nextel . Buy it for $35 billion then have a $37 billion loss. 2)Wimax. First 4G in the USA. Covers less then half the states, and Six months into it, Verizon kills them with their rapid LTE rollout. Sprint abandons wimax and joins the me too lte crowd. 3)Sprint pledges to buy $20 billion worth of iphones . At $600 a pop, they'd have to sell over 30 million iphones to meet that commitment. Over half of everyone on their network would have to have one just to break even. That's not the case. 4)If you stay still the ones who are moving will catch up and surpass you? Tmobile under the aggressive leadership of John Legere did just that.

    Sprint is pushing EVERYTHING into Boost. And they are making progress but again, they've diluted their brands with no focus like before. Who needs Virgin and Sprint prepaid? You don't. They don't even have byod. Boost has a weak anemic byod system that allows a few Select Sprint handsets at least the other ones don't even allow that. There are rumors that Sprint prepaid is gonna get axed. Good riddance I say. Also, remember Common Cents? That was another Sprint prepaid division. Paygo only. Lasted one year and died. Sprint always thinks quantity is quality. No quantity is quantity and quality is quality. Right now they are letting their massive (quantity) mvno program wither on the vine with outdated rates while Boost gets massive support. They have over 100 mvnos. What's the point? REal Mobile gets 100 mms and 250 megs of lte data on their $30 plan. Boost gets their $35 plan down to $30 with autopay and give you 2 gigs of lte and then if you stick around it can grow to five. I don't see even a single Sprint independent mvno with those kinds of deals . NOT ONE. And their byod? Lmao. In February 2015, they had a change in their Bring Your Own Sprint Device system which was a DISASTER. 30 MILLION Eligible Sprint devices were incapacited from activation. Mvnos went from a 90 plus percent activation success rate to a 90 plus activation FAILURE rate. And as a result, virtualy EVERY major independent Sprint only mvno added other carrier platforms to protect themselves from more Sprint screw ups. Eco mobile added Tmobile and Verizon. Expo mobile added Verizon. Real Mobile added Att. Sprint's own mvnos DON'T Trust them. And you know what? It's all Sprint's own damn fault. With the economy going bad and no more little guys to pick on , Sprint may well be doomed. We'll see what happens but expect them to lose a lot of power in prepaid except for Boost.

    ReplyDelete
    Replies
    1. Sprint already had well known prepaid brands Boost and Virgin Mobile when they decided to add Sprint as you go, which no one remembers, that lasted about a year before they scrapped it and replaced it with Sprint Prepaid as a more expensive alternative to both Boost and Virgin Mobile that doesn't offer anything the other two brands don't have except for 50 minutes of voice roaming. Apparently, that wasn't very popular for some reason and now Sprint is getting rid of their newest prepaid brand which they didn't need in the first place to focus on the popular brand they already had. All this while they neglected Virgin Mobile, yet another prepaid brand Sprint doesn't need but one that is far more popular than Sprint Prepaid ever was. What's Sprint's solution to all this? Try to move prepaid customers to high rate, high tax postpaid service, of course. Why wouldn't that work? Its crazy to think that Sprint wanted to buy T-Mobile when its obvious that Sprint is the carrier that should have disappeared long ago.

      Delete
  9. Marcelo Claure is doing a good job and his turnaround plan is already beginning to work.
    They just had a very good quarter, with postpaid adds up significantly, earnings up and net loss and churn way down compared to a year ago. The network improvements are real, and in markets where they are aggregating spectrum users are seeing amazing speeds of up to 100mbps, far faster than any other carrier. Sprint promotions are drawing in customers, and churn is down because of network improvements. Their plan to use thousands of small cells to fill in capacity gaps is a good one. Using dark fiber and microwave with 2.5GB spectrum for backhaul will save a lot of money in the near term, but it might not scale very well if Sprint is successful and starts growing.
    Saving $2.5B is not easy, even in a company like Sprint that was not run very efficiently. The savings made so far are substantial, and really boosted 4Q earnings. Sprint needs to achieve these savings because their credit is at junk status, and interest rates are slowly trending up. $20B of debt is a huge amount, a major obstacle to any sale or merger. Rationalizing their 4 prepaid brands and separate channels makes perfect sense as a cost-saving move.
    Don't forget that Sprint is still one of the two Big Boys in prepaid, with far more prepaid subscribers than AT&T. They have many millions of satisfied customers, and as long as they can retain the vast majority of them as they focus on fewer brands, the new strategy will work. This does not mean that Sprint will survive as a separate entity. $20B is still way too much debt, and Son is a very bright guy. If Marcelo Claure's turnaround plan does not work, Son will take action to sell, break up, lease their massive holdings of 2.5 GHz spectrum or form a partnership with a cable or satellite company rather than spending Billions more to prop up Sprint.

    ReplyDelete
    Replies
    1. I stopped reading after you said "the network improvements are real".

      Delete
  10. Solution for Sprint:
    0. Build more cell towers
    1. Sprint should acquires U.S. Cellular + King Street Wireless
    2. Invent new multi band
    3. Allow HD voice
    4. REORGANIZE plans, brands and policies.
    5. Promote their characteristic
    E.g. Verizon = high quality network
    AT&T = DirecTV Tmobile = cheap and multi media Sprint= Spongebob??
    6. Generous Roaming off or abroad usages

    ReplyDelete
    Replies
    1. 0. They are deploying ~20,000 small cells. As leases expire, they are moving towers to government land to save on rent.
      1. Their debt is already too high, so it make s no sense to borrow more and assume the big debts of those carriers.
      2. Already done. Their tri-band service with carrier aggregation is the fastest of the wireless big 4.
      3. Not necessary. Their solution is fine.
      4. They are already doing that.
      5. Agree. Their branding is muddled right now.
      6. Roaming costs a lot of money, but they already provide it for postpaid customers. Prepaid customers are not going to pay a lot more for generous roaming, and Sprint is trying to save money, not incur more debt. They already provide generous usage aboad. Free WiFi calling and text messages, plus mobile data in quite a few countries.

      Delete
    2. Help Mr.Son... you have Korean blood for hard work, Japanese blood for robot DNA, please give Sprint for mercy!

      Delete
  11. Any thought on how this will impact FreedomPop?

    ReplyDelete
  12. Twenty years ago MCI WorldCom went down in disgrace, because of dirty financial behavior. Sprint bought the remains of MCI and acquired some bad people.

    ReplyDelete
  13. U.S Celluar will acquire Sprint soon.

    ReplyDelete
    Replies
    1. Seems unlikely. U.S. Cellular is losing subscribers and only recently returned to profitability. They sold their operations in Chicago and St Louis to Sprint three years ago, reportedly because they couldn't afford to upgrade those markets to LTE. I doubt that U.S. Cellular management wants to bet the farm borrowing billions to acquire Sprint and all it's troubles. The cable companies and Dish need to diversify and have the cash, U.S. Cellular doesn't.

      Delete
  14. My dad has been a VM customer for years on their 18¢ plan. Should I be concerned about VM shutting down and switch him to another company like Tracfone? That's what I currently use. As long as the service works and he can keep his current number, he's not going to be too concerned about which provider he uses (that's in part why he's been with VM for so long).

    ReplyDelete
    Replies
    1. Claure actually said Sprint is de-emphasizing Virgin rather than shutting it down. Even if they do shutter Virgin, Sprint's been really good at grandfathering users plans and services when discontinue a brand or service so I don't think you have to worry about your father's plan as long as Sprint isn't acquired.

      If Sprint is acquired all bets are off but you will have plenty of advance warning as the regulatory review for the acquisition will likely last for the better part of a year.

      Delete
  15. Should've kept the Nextel name for its prepaid brand.

    ReplyDelete
  16. Sprint should spin off Virgin in an IPO or sell it to America Movil.

    ReplyDelete
Comment Page :