Active Stocks on the Move: Sprint Corporation (NYSE:S), Alcatel-Lucent (NYSE …

18 Aug 2015 | Author: | No comments yet »

Sprint CEO Claure takes wireless fight to “11” with iPhone plan.

SAN FRANCISCO — With Sprint’s new iPhone Forever service plan, CEO Marcelo Claure is taking his ongoing attack on larger rivals — and on the existing business model of U.S. wireless carriers — to an “11.” And, yes, that’s on a scale of one to 10.Under the “iPhone Forever” program, new and upgrade-eligible Sprint customers can trade in their current phone and get a new iPhone 6 for $15 per month, plus the cost of wireless service. Wall Street liked what it heard about the innovative offering, which lets Sprint subscribers lock in the latest Apple smartphone model whenever it becomes available. The bullish action has been driven by news that Sprint parent Softbank will make an additional investment in its wireless property, allaying for now concerns about the company’s cash burn rate.

Compared with other smartphones, iPhones are known for their high price tags, which fans would tell you are justified and critics would say are unreasonable. That vote of confidence from Softbank Chairman Masayoshi Son came the same week Sprint raised its cash-flow forecast for the year even as it reported a 9% year-over-year drop in quarterly revenue.

On Monday, Sprint introduced iPhone Forever, a new plan that will allow customers to upgrade to the latest iPhones at any time by paying a monthly fee. iPhone Forever is a 22-month leasing plan that costs $15 a month for a 16-gigabyte iPhone 6 on top of a customer’s wireless and data plan if you upgrade before Dec. 31, and it aims to eliminate waiting for the “upgrade” opportunity that is often tied to contract renewals. Sprint shares have shed 28% of their value since July 10, 2013, when Son, the billionaire technology investor, took control of Sprint in a $21.6 billion deal. The drop has cost Son about $6 billion, and last year he replaced former CEO Dan Hesse with Claure, a maverick Bolivian entrepreneur who built a billion-dollar business from buying and reselling phones. Unlike Sprint, however, T-Mobile isn’t requiring an unlimited data plan for individuals, though Sprint points out that it charges $20 per month less than T-Mobile does for unlimited plans. Claure, like his counterpart, John Legere at T-Mobile, has been attacking U.S. wireless giants AT&T and Verizon with more-flexible and innovative rate plans.

Claure says the No. 1 complaint of Sprint customers is that new smartphone models come out every year, but customers who are locked into two-year contracts have to wait to own them. Why this matters: As we said when T-Mobile announced its iPhone program, these promotions are in some sense a return to contract-based wireless service.

Instead of owning the phone, you’re leasing it, and are on the hook for the remaining full price if you ever try to take ownership or switch carriers. All this suggests the U.S. wireless market is on its way to more of an overseas model, where consumers have more flexibility on wireless carrier choices. Still, these are good deals if you’re planning to stick with T-Mobile or Sprint for the long haul, and are committed to upgrading your hardware every year.

Ramon Llamas, research manager for mobile phones and smartphones at Framingham, Mass.-based market intelligence firm IDC, said the plan would not benefit consumers who hold on to their iPhones for more than a year. “The leasing type plans, at first people hailed it as ‘Here’s a great new way to pay for your smartphone,’” Llamas said.

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