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Though Marcelo Claure knew things were bad at Sprint, when he took over as CEO in August he was shocked to find out just how bad.
Sprint
That month, the company’s market share for new customers was at 10 percent, which he said was surprisingly low.
“(At that level) you’re not even part of the conversation,” Claure said at an investor conference Wednesday. “You’re not even relevant.”
Such has been the state of Sprint. The company is the nation’s third-largest wireless carrier by subscriber base, but it’s poised to slip to fourth as it struggles with customer defections and a brand that stands for an inferior network and poor service. In his short stint as CEO, Claure has aggressively laid out new plans and a myriad of promotions — all designed to get consumers thinking about his company again.
On Tuesday, Sprint said it would knock off $10 from the phone access fees of two of its family share plans. That followed another deal in which it would double the data of competitor AT&T.
Sprint looks poised to continue upping the ante, with Claure teasing more promotions and discounts to come.
“You ain’t seen nothing yet,” Claure said, adding that the next two to three weeks has him “extremely excited.”
The other big names in the wireless business — Verizon Wireless, AT&T and T-Mobile — have pushed plans that claim to offer the best deal or service. But Claure said Sprint’s next campaign will make it clear that it offers the best value in wireless.
“We’re going to be the leader in pricing for now,” he said.
In addition to pricing, Claure said he wanted Sprint to be “the easiest brand to work with.” He said customers tend to dislike their carrier — no matter the service — and he wants to change that dynamic. That takes a page out of the playbook of T-Mobile and CEO John Legere, who has turned his company around by currying favor with and appealing — sometimes directly — to consumers.
Early progress?
Sprint offers some signs of improvement. In September, its share of new customers rose to 16 percent, a sharp increase from August. It’s porting ratio, or the number of customers who switch their cellphone number to Sprint vs. those who switched away from Sprint, has gone back to positive.
The company said it plans to return to growth in so-called postpaid subscribers — customers who pay at the end of the month and boast better credit — in the current quarter. In contrast, the company has lost 1.8 million phone customers over the first three quarters of the year.
Sprint posted a wider loss of $765 million — below Wall Street expectations — but returned to customer growth only through a jump in its lower revenue-generating wholesale business.
Apple
One of Claure’s early contributions to Sprint is the introduction of the leasing model. Under the model, a customer essentially pays a rental fee for a phone and can return it for a newer model after two years. Claure said he was impressed with the speed of the company once he sets it into action — when Claure came up with the idea, it took four days to roll it out to customers.
“Lease is new, and something we invented,” he said, adding that he believes he can stand out from the competition with his leasing plans.
The leasing model has been a critical part to its marquee offering — a special iPhone-centric unlimited data, voice and text message plan for $50 that is paired with a $20 leasing fee for an iPhone 6. At the end of the two years, customers can turn in the phone for a new model, continue paying the $20 fee and keep the service or turn the phone back in and cancel the service.
The focus on iPhone is a big deal — Claure said the company’s last launch was its biggest ever. One of the first things Claure did when he started was go to Apple. He said the relationship between Sprint and Apple had been damaged when he got to the company.
Still, Claure admits that Sprint is “far from turning a corner.” The customer turnover rate is still far higher than he would like. The company is also in the process of shedding lower-credit customers, which he said don’t tend to be profitable and belong in the prepaid business.
Sprint recently raised its credit standards to fall more in line with its competitors, and Claure said he would rather miss his projections for customer growth than to lower his credit standards.
Network and scale
One of Sprint’s biggest dilemmas remains its network and its poor reputation for service. On the network side, the company has largely completed the replacement of its older 3G network, and it’s working to expand its 4G LTE coverage, which is about halfway done.
“The hardest part of the network is behind me,” Claure said.
He downplayed the advertisements claiming superfast connection speeds, noting that customers ultimately want a good experience. It’s not about speed, but consistency, he said. Just an improvement in basic coverage would significantly help with customer turnover and loyalty.
Claure also hinted at taking advantage of Wi-Fi to augment coverage, but he didn’t provide any details. T-Mobile made a big push for Wi-Fi calling a day after Apple unveiled the iPhone 6 and its Wi-Fi calling feature.
When asked about whether Sprint, with its smaller size, could realistically compete against a much larger AT&T or Verizon, Claure conceded that there were advantages in scale, and he readily admitted that the company tried to buy T-Mobile. But with 55 million customers, he said, “there’s a lot that can be done.”
