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Sprint may follow T-Mobile’s footsteps and drop subsidies, according to CEO Marcelo Claure.
Troy Thomas/Sprint
During an investor conference call on Monday, Claure said he is mulling elimination of phone subsidies next year. The No. 3 wireless carrier, which earlier reported a fiscal second-quarter loss of $765 million, has been moving customers over to an equipment installment plan, in which people pay for their own devices through monthly payments. Sprint also introduced a new leasing program earlier this year — made available for Apple’s iPhone 6 and iPhone 6 Plus, with recent additions the Samsung Galaxy S5 and Galaxy S5 Sport — where customers pay $20 a month to essentially rent a phone.
Sprint’s special lease offer for the iPhone, along with a steady stream of new programs like doubling the data for family plans, have prompted consumers to move away from phone subsidies, where the cost of a smartphone is largely paid for by the carrier in exchange for a two-year contract. For example, the base cost of an iPhone 6 is $650, but the phone costs only $199 with a two-year carrier contract.
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T-Mobile was the first carrier to eliminate contracts and subsidies in early 2013, which kicked off CEO John Legere’s Uncarrier campaign and marked the start of the carrier’s tremendous run on customer growth. Verizon Wireless and AT&T, the two largest nationwide carriers, both still offer contracts and subsidies but have also begun pushing monthly installment plans.
The change in attitude over contracts marks a shift in the industry and how it conducts business. More of the financial obligation for the device rests upon the customer, although the service is presumably less expensive.
Sprint is considering eliminating subsidies as an option, Chief Financial Officer Joe Euteneuer said in an interview on Monday. A lot of it will depend on how the leasing program fares, which he said was critical.
“As we get to mid year, then we’ll have more visibility if Marcelo wants to go all in,” he said.
