This is not rocket science. If you sell something for less than it costs, you lose money. If you lose customers while doing that, you lose a LOT of money.
There is a finite amount of spectrum, and the bottom pair has a finite amount of resources. And they're entering a price war. There's no way they'll be able to build out a network that can compete with the duopoly in terms of either coverage or quality any time soon while simultaneously operating at negative revenue.
Sprint makes more sense at this level.
1. higher stockholder's equity.
2. more customers
3. they are about to go to war with tmobile and thus the pricing advantage of people switching to tmobile will lessen and they will no longer add new customers at the speed.
4. CHEAPER. marketcap is now 21b sprint, 23b tmobile
Maybe S and TMUS realize they're in a different market segment (value) than T an VZ (quality)? The former pair competes by offering an acceptable product at the lowest price they can, the latter offers the highest quality product at the highest price people will pay. From TMUS, Sprint's customers are an easier target (and it's likely that Sprint views T-Mobile's customers the same way). But you're right, a long-term price war benefits nobody.
The lobbyist Tom Wheeler might be wondering how long and further this war staged by TMUS & S will bleed their books. Bravo Duopoly.
If it was just one article quoting him as the sole source, I'd agree with you- I'm not a huge fan of his either. But it isn't. Here's another to add to the collection.
Have Investors Already Given Up On Marcelo Claure’s Strategy?
Published: August 20, 2014 at 7:13 am EST
By: Sam Quest
With Sprint coming up with several new plans to increase subscribers, investors have started to question the company’s ability to pull off its new strategy.
Sprint Corporation (S) declined 4.1% yesterday, and closed at $5.39, its lowest level so far this year. Trading volume stood at 44.4 million shares, 76.7% higher compared to the 30-day average of 25.12 million. The company’s stock is down 40.05% so far this year.
In its attempts to entice subscribers to switch onto its network, Sprint has announced various new offerings. However, investors remain skeptical of the company’s ability to deliver returns. Sprint has failed to post a profit since 2007. It has the highest churn rate in the industry, which might cause Sprint to lose its position as the third largest carrier.
While Sprint has been losing subscribers for a while, other mobile carriers, especially T-Mobile (TMUS), have seen massive growth in subscribers.
If Sprint is successful in convincing subscribers to switch, without a significant improvement in its quality metrics, even the early contract termination fee will not stop customers from switching back. Furthermore, Sprint’s margins are already much lower than its competitors, and by offering subsidies and lowering the price of its plans, it might be squeezing its bottom line further.
Looks more like the lliad rumors is swirling around that upped TMUS, while BBRY is on turn-around momentum.
Awesome demo leak on Passport by a Brit blonde; it has been pulled out but already uploaded on Youtube - the key pads is sensitive and can be used as a touch pad like the screen.
Sprint's new pricing plans may not be enough to curb churn
By Marina Lopes
WASHINGTON (Reuters) - Sprint Corp's cellular plan with more generous data allowances may fall short in overcoming defections by clients concerned about disruptions in the No. 3 cellular carrier's network, analysts say.
The new plan, which doubles the company's data offerings and provides a credit of up to $350 for customers switching from other carriers, does not benefit existing Sprint subscribers, who are kept on their original, more expensive pricing plans.
"The challenge for Sprint is that existing prices are still too high and they are slow to reprice the base because of the enormous finiancial impact it would have on a company with margins as low as theirs," said Craig Moffett, analyst at MoffettNathanson.
The new pricing plan, announced on Monday, fueled investor concern about Sprint's margins and pushed its stock down 4.1 percent to a year low of $5.39 on Tuesday.
"I think it is dawning on people just how hard this is going to be," said Moffett.
Sprint's shares are down 50 percent so far this year, hammered most recently by the collapse of its longtime plan to acquire T-Mobile US Inc, a move that could have reduced competition and created a stronger competitor to industry leaders Verizon Communications Inc and AT&T Inc.
Analysts said the pricing strategy unveiled by newly appointed Sprint Chief Executive Marcelo Claure could backfire and cause further customer defections, already high as the company undergoes a network overhaul that has caused disruptions in service.
Sprint may not be able to withhold the offer from its highest-paying customers for much longer if it wants them to stick around.
"They will have to match this effort with some type of retention effort," said Mark Stodden, analyst at Moody's Investor Service.
Don't take it so seriously, it was just a generalization as you said. Each carrier has a different business model. V and T have good networks ad high prices. TMUS and S have, er, less good networks and low prices. Of course people will be attracted to whichever best fits their needs. The point is, there's a reason that V and T have so many more customers than TMUS and S, and without a major shift in consumer sentiment there will only be so many customers available for "poaching", and TMUS and S will both be competing for them.
lliad will not make an offer acceptable to DT. Any offer less than 40 will be immediately rejected. Since the day of T, $39/share, the value of TMUS has gone up 25% IMO and analysts.....
Sure, I'll give you that- *IF* Sprint's new network is darn good, *AND* they can afford to operate it at a loss, they might be able to poach some customers- maybe even from TMUS. But remember the customer demographics, V and T customers generally want the best network money can buy, not necessarily the most acceptable network at the best value.
BTW, nice username, Cosmo. ;)
your a Fool if you believe what you Post. Go back to Sleep and when you wake up the world will look much brighter while you are on the phone with Sprint
Do you have any evidence to support that claim? On a related note, RootMetric's website indicates that they've already begun their second-half research, so we should know for sure in the relatively-near future.
I'll admit to counter-trolling with this particular thread, but that's really what I was getting at in the other ones. Sprint is attempting to exploit the underdog position, and there's absolutely nothing wrong with that, as long as you acknowledge that it's unsustainable in the long term and hinges on acquiring customers. The part that cracks me up is that Sprint backers seem to be assuming it's a given that all of the customers who left for TMUS will return. Anything is possible, but some things are far more likely than others.
Ghetto - when TMUS launched uncarrier, many posts about impact on rev, profit, etc and unsustainable. They kept adding more value, same attitude from some posters. Now S bails on merger and copies them, the press shoots it to bits, and ol ez$ doesn't think the same concerns he had on TMUS programs appy to S. Uh, thats illogical. Same for the 'they will return' argument. If they like who they moved too, price is same, why move? I do think the merger would have been positive and hope DISH, Slim or China Mobile make a move so we can truly compete with T and V.