With a T-Mobile merger no longer on the table, Sprint has kicked off a pricing war with the introduction of a family plan that offers twice as much data at same price as the competition.
Later this week, the Overland Park, Kansas-based carrier, which is majority owned by SoftBank, is expected to unveil cheaper individual plans, as well.
Investors reacted negatively to the news, pushing Sprint shares down roughly 4 percent, or 26 cents to $5.36 a share to hit a low for the year. Either investors didn’t think the price cuts were deep enough to take on T-Mobile, or they believe that the company doesn’t have the financial wherewithal to weather an all-out pricing war. Sprint carries about $27 billion in debt on its balance sheet.
Ultimately, Sprint’s new plans are designed to add wireless subscribers, but that may be difficult since they are difficult to understand and full of exceptions.
Over the past year, T-Mobile has been the leader on price promotions in the wireless industry, led by the outspoken CEO John Legere. Now that a merger is unlikely to occur between the two smallest carriers, Legere has been a critic of Sprint’s tactics.
Yesterday was no exception, with Legere calling attention to Sprint’s decision to end the “framily” plan, which allowed friends and family to share buckets of data. On Twitter, he said “Hmm, it’s the end of the #framily! I’ll be sure to send some #flrowers to the #fruneral.”
— John Legere (@JohnLegere) August 18, 2014
T-Mobile was trading essentially flat today, up 20 cents to $29.03 a share.
Legere also called attention to the confusing nature of the Sprint announcement, which included four charts in the press release. One chart depicted how a shared plan could have as much as 60 GB of data for $225 a month, plus $15 per (non-discounted) phone, and $10 for tablets or $20 for mobile broadband devices.
Another compared how the limited-time offer contrasted to rivaling plans.
In essence, the short-term promotion lets a family split 20 GB of data for $100 a month plus $15 per line. Sprint will add an additional 2 GB of data for every line, so a family of four will have 28 GB for $160 a month.
There’s some additional qualifications. For instance, you’ll have to sign-up between Aug. 22 and Sept. 30, and current subscribers cannot apply. Of course, coverage is also a consideration. As we reported yesterday, Sprint came in dead last for overall performance, according a study by RootMetrics.
The moves announced yesterday are the first big change made by Marcelo Claure, who replaced Dan Hesse as CEO at Sprint after the merger was canceled. Claure, who had served on Sprint’s board since January, and was previously the CEO of Brightstar, has said cutting prices will be his biggest priority.
“The message is simple: We are back in the game. We are going to offer most competitive value for American consumers,” Claure told Reuters in an interview.