Sprint Overhauls Prepaid Strategy with $25 Unlimited Offer

By Tara Seals

Since Sprint-Nextel Corp.’s acquisition of Virgin Mobile USA, the carrier has been busy combining the resources and experience of the Boost Mobile and Virgin Mobile prepaid teams. The fruit of that effort was announced Thursday: Sprint will focus on four niche brands, each focused on serving distinct customer segments, amid unprecedented uptake in prepaid services. New offers are in the hopper too, including a rock-bottom $25 unlimited data and messaging plan from Virgin Mobile.

In the first quarter of 2010, more than half of Sprint’s mobile gross additions in the U.S. selected prepaid, and the carrier predicts that approximately 70 percent of the net adds in 2010 will choose plans without a contract. Dan Schulman, president of Sprint’s prepaid group, noted that “this is the year that prepaid moves to the forefront of the wireless industry. With almost 60 million people now on prepaid service, the no-contract market has clearly moved beyond the credit-challenged and lower income segments. The prepaid market has changed dramatically, with customers across multiple demographics and lifestyles demanding a wide variety of handsets, features, and plans tailored to their specific needs and wants.”

Virgin Mobile will lead the way in Sprint’s new approach with offers for the youth market, its traditional strength, but now clearly focused on data, texting and social networking rather than voice. Notably, it will soon launch an unlimited messaging, e-mail, data and Web “Beyond Talk” plan for $25 a month for 300 voice minutes, and a new high-end handset lineup that includes the Blackberry Curve, the LG Rumor Touch and the Kyocera Loft.

Two other “Beyond Talk” unlimited data/SMS plans include $40 to add 200 minutes of voice per month, and $60 for unlimited voice. Also for the first time, Virgin Mobile customers can add Blackberry data service to any of these plans for just $10 more, enabling a $35 plan consisting of both voice calling and Blackberry data service.

“Since we expanded distribution, lowered the price, and added more data capacity without changing prices, sales have tripled,” said Schulman. “We’ll continue to enhance this product line as well, possibly under multiple brands to include new services and the very latest in high speed networks, including 4G where available.”

Meanwhile, Boost Mobile will focus on talkers and texters more so than data users. Boost has added unlimited 411 calls, e-mail and instant messaging to its $50 Monthly Unlimited plan, which also features unlimited talk, text and Web access. The brand also offers push-to-talk.

Assurance Wireless is a free wireless service developed specifically for the 37 million low-income households eligible for government-assistance programs like Supplemental Nutrition Assistance Program (SNAP, or food stamps). Participants receive a free cell phone and 200 free minutes of airtime for local and long-distance calling every month. It is available in Michigan, New York, North Carolina, Tennessee and Virginia and will be available in approximately 25 states by the end of 2010.

A new pay-by-the-minute brand – the name wasn’t announced – will cater to the no-frills crowd made up of what Schulman called “basic communicators” who spend less than $30 per month, mostly on voice. Roughly 63 percent of the no-contract market chooses to pay by the minute or by the day, according to Nielsen Prepaid. This will launch in 16 markets, date TBA.

The overhaul could pay off in a big way. Reports from Ovum/Datamonitor and IDG show that the number of new prepaid wireless customers in the U.S. outnumbered new, contract-based cell phone agreements for the first time ever in the fourth quarter of 2009. New prepaid cell phone subscribers accounted for nearly two thirds (65 percent) of the 4.2 million net subscribers added by U.S. phone carriers in the fourth quarter of 2009. The prepaid segment represents a larger proportion of subscribers in the U.S. than ever before, hitting 20 percent in the 4th quarter of 2009, up from 18 percent at the end of 2008 — the segment enjoys a 17 percent growth rate, compared to 3 percent for contract-based cell phone service.

“The era of cell phone penny pinching is officially here,” said Jose Guzman, project coordinator, New Millennium Research Council. “Thanks to the recession, the U.S. cell phone marketplace continues to undergo fundamental changes that will just get bigger as the economic downturn deepens. What is different from a year ago is the explosion in new ‘all-you-can-eat’ and unlimited prepaid deals as low as $30 and $45 that will remain attractive to consumers long after the current recession is over.”

“The launch of this portfolio goes far beyond changing prices,” explained Schulman. “We are introducing innovative and attractive offers for specific groups of customers based on usage and habits – from those who are on limited budgets and use their phones infrequently to those who want high-end devices to use for all their communications, entertainment and social networking.”