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Sprint (S) Unveils Mobile-Service Freebies to Lure Customers

U.S. national wireless carrier, Sprint Corp. S, launched a marketing promotion yesterday, offering a year of “unlimited” talk, text and data to users who switch from Verizon Communications Inc. VZ, AT&T Inc. T or T-Mobile US Inc. TMUS. In doing so, the company further intensified the mobile service pricing war going on among the four nationwide service providers in the U.S. wireless market.

Per the deal, customers who switch to Sprint before Jun 30, 2017, and bring their own devices and SIM cards, will get free service until Jul 31, 2018 for up to five lines. The company will not charge any activation fees.

Unlimited Data Plan War

In Feb 2017, Sprint upgraded its unlimited data plan. Now new customers can buy a single line on Sprint’s unlimited plan for $50 and two to five lines for $90, per month. Any extra line will cost $40 each. These rates will remain effective till Mar 31, 2018. After that, the company will raise the prices back to normal rates, per which, one line will costs $60 a month, two lines will cost $100 and every line beyond that will cost an additional $30.

The plan will also offer high-definition (HD) video streaming and 10 GB of LTE mobile-hotspot data per month for new subscribers. However, to enjoy HD video streaming on an unlimited plan, subscribers may have to pay for a separate $75-a-month. We observe that Sprint’s offer is cheaper when compared with the unlimited plans of U.S. wireless carriers such as AT&T, T-Mobile US and Verizon communications.

T-Mobile US’ unlimited plan starts at $70 per month for a single line, while two lines are available for $100 a month. Verizon offers a single line of unlimited data for $80 a month with a second line for $60. AT&T's unlimited plan starts at $100 a month, but it doesn’t include monthly taxes and fees, consequently raising the final cost. Notably, Verizon and AT&T do not include those fees in their advertised rates, either. However, T-Mobile US does.

Sprint Leaving No Stone Unturned

Sprint has been continually making efforts to lure customers from rival carriers by offering attractive promotional plans and lucrative discounts. This has led to a high cash burn rate and heavy losses for the company. Sprint has a debt-laden balance sheet and has been witnessing losses each year since 2007. At the end of fiscal 2016, the company had nearly $40 billion of debt outstanding.

Management has taken a two-pronged survival strategy. The first step is to, try to increase its postpaid subscriber numbers to gain market share. Second, try to find out a possible merger with another wireless operator or cable multi service operator (MSO). Notably, two major cable MSOs, namely Comcast Corp. CMCSA and Charter Communications Inc. CHTR have decided to enter the U.S. wireless market as mobile virtual network operators in 2017.

Price performance of Sprint

Year to date, the stock price of Sprint has lost 1.78%. However, this figure was better than the Zacks categorized U.S National Wireless industry’s performance which lost 7.51% in the same time period. Nevertheless, Sprint is on track with its network modernization and integration efforts, which should fortify its position in the wireless industry. The company is also planning to use microwave technology instead of the backhaul system to save operating costs. We believe these are the primary reasons behind the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Click for Free AT&T Inc. (T) Stock Analysis Report >>
 
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Click for Free T-Mobile US, Inc. (TMUS) Stock Analysis Report >>
 
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