Wireless price war is about to break out
Marcelo Claure is only one week into his new role as CEO of Sprint (S) and already he is promising some big changes, which could ignite a wireless price war and mean better deals for consumers.
In a company-wide town hall meeting yesterday, Claure reportedly said the company will introduce "very disruptive" prices next week. Yahoo Finance Editor-in-Chief Aaron Task said this not just bluster from Claure, and we will probably see a price war break out in the next couple of weeks. “I think this is what Claure has done in the past and he believes in sort of the cheap phone market,” Task said.
Sprint’s parent company is Japan’s Softbank, and founder Masayoshi Son, who is the chairman of the company, is also a big supporter of the new CEO. Claure joined Sprint’s board in January. He was also the founder of mobile phone distributor Brightstart, which was acquired by Softbank last year. Son brought in Claure to replace Dan Hesse last week when Sprint announced it called off plans to takeover T-Mobile (TMUS) after facing huge resistance from regulators.
Related: Sprint pulls the plug on T-Mobile deal, names new CEO
“Both T-Mobile and Sprint shares are down huge since that deal broke up, and this is the only tool in the box for the number three and four players... too basically race to the bottom in terms of the cheapness of the plans your willing to offer,” said Yahoo Finance Senior Columnist Michael Santoli. This is also vindication for regulators who wanted four players in the wireless space because they believed it would create more competition and more choices for consumers, Santoli said.
"We're going to change our plans to make sure they are simple and attractive, and make sure every customer in America thinks twice about signing up to a competitor," Claure said, according to Light Reading. While cheaper prices could mean more customers for Sprint, it could also take a toll on margins. Santoli said this may not be good for Sprint business long-term, but it’s very good for consumers.
However, Yahoo Finance Columnist Rick Newman says consumer beware because wireless providers do play a kind of shell game. We’ve already seen these so-called price wars with T-Mobile to some extent, according to Newman. They’re not as beneficial as consumers might think; there is a lot of cost-shifting by wireless providers. As evidenced by the long list of charges on a cell phone bill. Consumers may pay less for a basic plan, but wireless carries make up the fees somewhere else.
Newman says, “Look at all the fees, add it up, and see how much you are really saving.”
We want to know what you think: Would big price cuts be enough to make you switch wireless carriers? Vote in our poll, leave a comment below or on Twitter.
