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Sprint's 20GB Data Plan May Spark Price War for US Carriers

Zacks Equity Research

In order to counter rising competitive threats from low-cost plans offered by other carriers, Sprint Corp. ( S) doubled its data plan to a 20GB one at only $100 per month (inclusive of unlimited voice and text service). Moreover, the new plan will support up to 10 lines at $15 each with an additional 2 GB for every connection, which leads up to 40 GB for a family of 10 members.


The new plan will be available from Aug 22 to both existing and new members. To add to the positives, families who opt for the plan will enjoy 3G/4G speed at an affordable rate. 


Earlier, both Verizon Communication Inc. ( VZ) and T-Mobile U.S. Inc. ( TMUS) made successful introductions of attractive shared data services. Also, the carriers witnessed significant subscriber growth in the recently concluded second quarter of 2014. On the other hand, Sprint lost a considerable number of subscribers over the same timeframe. 


Thus, to drive growth and check customer churn, Sprint has come up with this alluring family data plan to gain a competitive edge over leading U.S. carriers, namely, Verizon, AT&T, Inc. ( T) and T-Mobile. 


Meanwhile, both Verizon and AT&T offer monthly 10 GB shared data packs starting at $160 each while T-Mobile provides the same plan at 2.5G speed for $100.


In fact, we believe that the new pricing plan will fuel up the pricing war among the U.S. wireless carriers. We also expect Sprint to launch several such services at attractive rates going forward in order to gain a strong foothold in the U.S.


On the flipside, we believe that Sprint’s margin will be considerable pressurized by the introduction of such economical services. Also, it is to be seen how the company deals with the negative aspects of increasing churn and lower ARPU.


Currently, Sprint has a Zacks Rank #3 (Hold).

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