Sprint Prepaid

There is a piece in Prepaidphonenews.com about developments in Sprint Prepaid.

This excerpt, in particular, caught my eye:

"Not only are the new plans not much better than the old ones, they are also inferior to comparable Boost Mobile and Virgin Mobile plans. Virgin Mobile offers the equivalent of Sprint Prepaid's $55 5 GB plan for $20/month less. Boost's $50 plan is the same as Sprint Prepaid's $65 plan except that hotspot on Boost is throttled after 8 GB instead of 5 GB.

Sprint Prepaid's phone lineup includes a couple of Sprint's newest entry level phones, but no iPhones or
Android flagships":

Does anyone see a clear strategy at work here?

Sprint effectively has 3 separate MVNOs (SPP, Boost, and VM).

What is the logic behind having these separate entities?

Is there some regulatory constraint that makes it impossible to have a single merged unit or are there other considerations?

It's simply the use of multiple brands to practice price discrimination and therefore profit maximization.

That certainly would be a very plausible reason for the approach.

The one aspect of that approach that makes me wonder is the fact all three appear to the consumer to be competing based on price. So it does seem a little odd in that probable subscriber gains by one of the three is at the expense of another of the three so the net subscriber total does not change.

Obviously, without being able to analyze the numbers it is hard to say anything definitive.

In a low margin business, the normal expectation is that the optimal outcome would be achieved by spreading overhead over the largest number of customers possible rather than splitting them into several pools each of which would have higher unit overhead cost.

We don't know how well Sprint management execute on the concept, but in industries where the product is similar, to compete you look at cost leadership, brand leadership and service leadership as differentiators.

Costco is an example of a company that excels in all three. R+ failed in all three.

I would say that from a branding point of view, Boost and Virgin have distinctively different feels to each other and Sprint.

Sprint advertises and places itself against the other big 3. From an awareness perspective amongst a sizeable proportion of the populace, that by itself bypasses most MVNOs.

As to overheads spread across different brands, it must be the case that these are relatively minor and may simply be mostly marketing related. Certainly not enough to outweigh the benefits of revenue in somebody's eyes. You might be right that the strategy doesn't benefit Sprint but I very very highly doubt the concept is not valid for total profitability.

Why do I say that? Carlos Slim.

I do agree with you on the brands having distinct identities which is fully in line with your earlier point about market segmentation.

I suppose what has me puzzled is the macro picture.

Since the election both Sprint and TMobile stocks have really been strong, rumor is rife about a merger, the new FCC Chairman is probably more flexible on the issue, and the Sprint CEO on the January 31, 2017, call was very explicit about pursuing "strategic opportunities" as consolidation is needed going forward.

The idea of a Sprint/TMobile merger is very hard for me to grasp. The technologies are incompatible, the culture is very different between the two companies, and even if the goal is somehow to streamline backup office and administrative functions, the economics of such a deal seem hard to see.

So in that setting where a merger with a seemingly odd partner is apparently under active consideration, I fail to understand the logic of maintaining 3 separate CDMA prepaid services if consolidation is seen as important.

There is definitely a major piece of the puzzle I am missing because there must be some grand long-term strategy here. Usually, such strategies are easy to spot but this is not one I see clearly.

You mean like how T-Mo bought out Metro PCS and AT&T bought out Cricket?

It seems different to me.

With T-Mo/Metro PCS and AT&T/Cricket, one is dealing with a tier 1 carrier and its MVNO.

Sprint and T-Mobile are both tier 1 carriers who manage their own networks and also sell spare capacity to their MVNOs and other MVNOs what want to use their respective networks.

However, if Sprint and T-Mobile merged their customers (except for those with universal phones) could only use one of two networks. Both networks would have to be maintained separately so there are no savings on that front. It might be possible over a very long term for Sprint to switch to GSM but the cost would be enormous and only be feasible in the distant future.

So the question I am stuck with is if I were the CEO of Sprint, why would I want to merge with T-Mobile?

In the cases of ATT/Cricket and PCS/T-Mo, IIRC, the technologies were compatible with each other (All GSM). This would be CMDA/GSM and that's what is incompatible on the tech side. While I love the idea of finding a way to create network redundancy, this kind of change would basically force users to buy unlocked/dual band phones in order to take advantage of it (which might be good for phone makers). It would also probably require some serious reprogramming of SIM cards. Not saying it can't happen, but that's a pretty risky investment that could backfire against both companies pretty easily.

The wish of every capitalist is to become a monopolist and avoid the tedium of competition. And the two smallest MNOs are tired of being outmuscled by the biggest two.

"to become a monopolist and avoid the tedium of competition"

Agreed--it is just a little odd to think of the wicked monopolist who is the only Tier 1 Carrier with both CDMA and GSM and whose coverage on either network is more limited than the other Tier 1 carriers on those networks who somehow have more subscribers and higher prices.

On the other forum I used to joke about RingPlus being the only real monopolist in the cell phone world--no competition whatever in the totally free cellular service business. Yes, even being in the enviable position of being the monopolist and having totally pricing power (by arbitrarily increasing/decreasing quantities for the set price of zero) it did not prove profitable or even sustainable.

I don't see a real fit between T-Mobile and Sprint either. Sprint has a ton of MVNOs, and, as you say, the technologies don't align. I don't see how they would save. Perhaps one way would be to get rid of towers in the same area, but, that makes little sense given they use different tech. Perhaps a GSM/CDMA service that combines the 2 could work on some phones, but, I just don't see it. Heck, why anyone would want to take on Sprint debt is beyond me. Sprint can be decent on their family plans, $20 per month isn't bad.

My 2 cents: With Project Fi, Google has created a sim card and the compatible radio technology in a few phones that can and does take advantage of both CDMA/GSM networks. If they can get the sim to work on most newer phones, or create there own modestly priced phones that will run on both CDMA/GSM networks, wouldn't they have achieved the desired goal. And they certainly could buy both T Mobile and Sprint, before or after a merger. And the more people on Android phones or using Google apps, the more ad revenue. What do you think?

"If they can get the sim to work on most newer phones, or create there own modestly priced phones that will run on both CDMA/GSM networks, wouldn't they have achieved the desired goal. "

Actually that would make perfect sense--I had never thought of it.

I think you have solved the mystery.

With a the volume of subscribers from the two carriers combined it would be easily feasible to produce a complete array of such phones ranging from modest, budget-priced devices all the way up to flagship phones. The seamless network switching would be the magic sauce. With the network upgrades both Sprint and TMobile have on the books their combined coverage over the next 3-5 years should improve dramatically.

I doubt the DOJ would allow Google to buy the carriers but that would not be necessary.

The real beauty of this approach would be the ability to integrate subscribers entire digital life into a single seamless platform with Android as the foundation. This could be a true rival to Apple and the iOS ecosystem. Such a combination would certainly be much more attractive from a price perspective to consumers.

Your real name is not Carl Icahn by any chance?

Your real name is not Carl Icahn by any chance?

Ecce Homo---not really, for I only make good investments.

It's hard to glean what Google is up to in that so many of their projects fall by the wayside. But I do find it interesting that Fi has been in existence for a few years now and no one has come up with a competitive sim card or radio technology for phones, at least as far as I know. So assuming Google has strong patents on this technology, one would think that they could, at the minimum, make a fortune selling the use of this technology to phone makers and the entire telecom industry, let alone creating their own cell phone company. Add to that the recent news that Google has updated GV for the first time in a long time and plans to fully integrate it with Project Fi, one can only wonder where their long time phone interests are bound. To be continued.


I tried a few times on the RingPlus forum to get a discussion going about the business model behind "alternative revenue stream" approach.

The reason I was interested was twofold. First, in thinking about how people actually use phones and the likely benefit to advertisers from using this channel, I just could not see how the numbers could be made to add up.

Furthermore, if indeed this approach was indeed a great opportunity why had had Google or another of the FANG group not already launched it?

My sense is that the model just does not compute in an industry with intense competition and every declining revenue per customer.

TextNow does have a model with some of these characteristics. However, if one wants to use it then you either have to have their paid service or rely on a different service that will provide the wifi or cellular connection to run their app.

"Google" Personally, I find the company to be the root of all evil, so I'll just bow out of this conversation now. :silly:

"Furthermore, if indeed this approach was indeed a great opportunity why had had Google or another of the FANG group not already launched it?"

That particular argument is a weak one. Not every good idea comes from well known companies, certainly not Google. I actually still believe the model could raise significant revenue. R+ was not supposed to pay Sprint very much if what R+ states in the lawsuit was true. And, I suspect the big savings was using the original network they were forced to abandon for call routing. Once that failed, it was much more likely to fail.

"I actually still believe the model could raise significant revenue. "

If one looks at just the approach RingPlus had of serving ads on outgoing calls the math does not look very promising.

Assume the average customer makes 200 outgoing calls a month. That is probably on the high side since many cell phone users do not even use 200 minutes and make fewer than 50 calls a month.

If a customer is being provided something like 1000 minutes, texts and 2GB of data the raw cost is probably at least $10 including line charges and could be quite a bit higher. When overhead is factored in it could easily be in the $13+ range.

To generate $13 just to cover that cost would imply advertisers are willing to pay a rather high amount per completed call.
If the customer makes 50 or fewer calls per month the math becomes really difficult.

Yes, but as I said, I was going under the assumption all along and as the lawsuit said, that Sprint was charging R+ close to nothing for service. I see so many here reporting they need unlimited talk and text, I suppose those are not the average though. The entire discussion is based on what it costs to provide that service. I know I can get unlimited talk and text from Sprint itself with 1Gb data for $20 per month, I presume they make money on that, so, their cost is obviously less. And R+ revenue model was not just ringback ads. It was other forms of advertising and leveraging their social platform, which never came to fruition. I didn't say it would supply the whole cost, just significant revenue. Given what some MVNO sell such plans for, such as MINTSIM, I am paying less than the $20 I mentioned on Sprint, and getting unlimited talk and text, and, 2.5GB/mo. I presume they make money too. And, they are getting service from TMobile, who I presume makes money off of MINTSIM. So, I am unclear as to what the service actually costs, but, it would appear to be pretty low, under $10/mo. Also, recall R+ was using non cellular transport for much of the call path, I am guessing that was sold at a much lower cost. So, their cost could have been even $5 per month. But sure, on low users, I don't see how. I know this all changed in the end, but when R+ gave up on the original transport, that was probably their death.

My understanding;

  • Sprint marginal cost $0, so selling $20 for unl/unl/1gb is all marginal profit.So is Boost #30 for 5gb.
  • Ringplus said Sprint was charging a wholesale rate higher than retail, presumably through VM and Boost. I think the reference was to the $30 for 5gb plan on Boost, so Ringplus might have been paying >$6... maybe $10 a GB...
  • Ting mentions Sprint charges a line fee. Not sure how much but Ting is charging $6