April 4 (Bloomberg) -- Sprint Nextel Corp. plans to start a service this year that will allow customers to make purchases with their mobile phones, ahead of a similar initiative from rivals Verizon Wireless, AT&T Inc. and T-Mobile USA.
Sprint is working with payment networks and handset makers on technology called near-field communication, or NFC, which allows people with smartphones to make purchases by tapping them on or waving them in front of electronic readers in stores, said Kevin McGinnis, vice president of product platforms.
The effort may give Sprint an advantage in attracting new customers and compelling existing ones to upgrade to the tap-and-go handsets. The competing joint venture, known as Isis, said in November its network may not be available to consumers until 2012.
“We intend to make this an open solution where consumers can use their phone in a variety of physical locations,” said McGinnis. “Because we’re allowing other brands and other institutions to participate, they can also tell their consumers that this is available on Sprint.”
Rather than take a percentage of each transaction, as Isis plans, Sprint could share in revenue from sales of coupons sent to its customers’ handsets or targeted advertising, McGinnis said. Users’ purchases would be billed through their regular credit-card statements.
“That’s considered the holy grail in preventing bill shock,” said Richard Crone, president of Crone Consulting LLC in San Carlos, California. “All the carriers will have to work on merchant acceptance, which today is very low.”
Crone said about 150,000 U.S. merchant locations are enabled for NFC payments today, compared with about 6 million that accept traditional credit-card payments. Microsoft Corp. and Amazon.com Inc. are both working on services to enable NFC, people familiar with the companies’ plans said last week, and later this year Google Inc. is set to release its NFC-enabled Samsung Electronics Co. Nexus S handset.
Apple Inc., the maker of the iPhone, is also among those working on a NFC technology in its handsets, consulting firm Envisioneering Group said in January.
Tap-and-go handsets may also allow for other transactions, such as those at vending machines, parking meters and transit ticket gates, Forrester Research Inc. analyst Thomas Husson wrote in a March 31 report.
“Operators believe payments represent an opportunity for them to create value-added services, reduce churn, increase data revenues, and impose hosting and management fees on third parties,” Husson said.
The number of phones with NFC will double in 2012, from 35 million shipped in 2011, consultant ABI Research estimated. In 2014, 340 million global mobile users will use mobile payments, with such transactions totaling $245 billion, up from $32 billion last year, according to Gartner Inc.
Troy McCombs, a spokesman for New York-based Isis, declined in an e-mail to comment on Sprint’s plans.
Handset maker HTC Corp. is working on phones that will incorporate NFC technology and will likely release at least one version this year, said Jason Mackenzie, Americas region president, in an interview last month. McGinnis declined to say which device manufacturers Sprint is working with, though he noted the Nexus S phone will be on the carrier’s network.
Sprint had been a part of the Isis group and later decided to develop a mobile-payments service on its own, McGinnis said.
Sprint, based in Overland Park, Kansas, rose 6 cents, or 1.3 percent, to $4.62 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 9.2 percent this year.
Verizon Wireless is co-owned by Verizon Communications Inc. and Vodafone Group Plc, and T-Mobile USA is a unit of Deutsche Telekom AG.
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