Sprint Offers ‘IPhone for Life’ Plan to Win Back Users

Sprint Corp. introduced an “iPhone for Life” plan that lets customers get a new version of Apple Inc.’s smartphone every two years as it moves to win back customers lost to rivals including T-Mobile US Inc.

The service costs $70 a month and includes unlimited data, Sprint said on its website yesterday. Customers make no initial payment for the phone or related taxes on the device because they are essentially renting it, the company said.

Chief Executive Officer Marcelo Claure is counting on the new iPhone 6 to help Sprint start adding subscribers again after a seven-year streak of customer losses. By tying promotions to Apple’s device, Sprint is following in the footsteps of controlling shareholder SoftBank Corp., which used an exclusive iPhone deal to gain market share in Japan.

“I challenge anyone in this industry to beat this,” Claure said in an interview yesterday. “Nobody is going to do it.”

Sprint is up against steep promotions from its competitors, which are clamoring to use Apple’s new iPhone to drive customer growth. Verizon Communications Inc. is offering an iPhone 6 for free to customers who trade in older models and sign up for a new two-year contract. The offer comes in the form of a $200 gift card that can be applied to the regular $199.99 price for the basic 16-gigabyte version of the device.

The Verizon offer is a “gimmick,” Claure said. A two-year smartphone contract on Verizon starts at $70 a month for 500 megabytes of data, according to its website.

‘Skipping Employees’

After spending his first week at Sprint talking to employees, Claure, who took over Aug. 11, said he’s been chatting with customers ever since. That’s what led him to conclude they’d be attracted to unlimited-data plans for the iPhone, eliminating their concern that they could go over their alloted megabytes each month.

“I’m skipping my employees and going straight to my customers,” he said. “We’re going to play unlimited, because we have the capacity to offer unlimited.”

Claure said only Sprint’s ownership of high-capacity spectrum, acquired last year with the purchase of Clearwire Corp., makes it possible for the company to offer unlimited-data plans, while AT&T Inc. and Verizon have been pushing heavy users of bandwidth to go to capped plans.

Earlier this week, Sprint said it would match other wireless companies’ deals for smartphone trade-ins, similar to an offer that smaller rival T-Mobile announced earlier the same day. The trade-in campaigns are designed to lure customers who want to upgrade to the new iPhone 6.

Resale Expertise

Both Sprint’s trade-in program and its iPhone plan rely on Claure’s expertise in phone resales. Claure sold the phone distributor he founded, Brightstar Corp., to SoftBank, giving Sprint an experienced partner to help outfox rivals in getting the best prices for used phones in the market.

“When T-Mobile sent out a press release the other day saying they would guarantee the best price, we knew within 10 minutes that it wasn’t true,” Claure said.

SoftBank, controlled by Masayoshi Son, acquired a majority of Sprint last year for $21.6 billion, giving the Japanese billionaire access to the U.S. market. Sprint gained 0.8 percent to $5.82 at 9:52 a.m. in New York.

New Phones

Apple unveiled yesterday the iPhone 6 and its larger cousin, the iPhone 6 Plus, which have screen sizes of 4.7 inches and 5.5 inches. The devices have rounded edges and a thinner frame than earlier models, as well as higher-resolution displays.

With a traditional two-year wireless contract, the iPhone 6 costs $199 to $399, while the 6 Plus is priced at $299 to $499. The devices will come in silver, gold and space gray.

Since joining Sprint, Claure has embarked on a campaign to make the carrier’s service plans more competitive after falling behind rivals. In the past few weeks, he has reduced the cost of pay-as-you-go service and monthly subscriber packages while doubling their amount of data.

Claure took over from Dan Hesse after Sprint, the third-biggest U.S. carrier, abandoned a plan to merge with T-Mobile. He has told employees that Sprint is focused on cutting costs and competing aggressively for users.

The Sprint CEO said he plans to lean heavily on SoftBank for his turnaround plan, including bringing in some of the parent company’s people to help run the U.S. carrier.

“My predecessor looked at Sprint as an independent company. I have no problem extending my hand for help,” he said.

Most Aggressive

T-Mobile, led by CEO John Legere, had been the most aggressive U.S. carrier until Claure’s arrival at Sprint. It added 2 million monthly subscribers last year through lower international rates and contract buyout offers to users switching service. Legere is holding an event today in San Francisco to discuss T-Mobile services.

In July, Overland Park, Kansas-based Sprint reported its first quarterly profit in more than six years, with sales that topped analysts’ estimates, after holding onto more subscribers than projected. Still, the company again lost monthly contract customers, and Legere has predicted that T-Mobile will overtake Sprint in total customers by the end of the year.

Things are starting to change already, Claure said. Three weeks ago, he jettisoned Sprint’s Framily plans in favor of simpler data-sharing plans for families. Since then, Sprint has begun gaining more customers than it loses for the first time since the SoftBank takeover, and the new users have higher credit quality, making them more profitable, he said.

“Even I didn’t get Framily,” he said.

The early results prompted a phone call from Son. “Oh my God. I love you,” Claure recalled him saying.

During the interview yesterday, Claure was interrupted by another call from Son, Sprint’s chairman. He promised to call back. While the two clearly communicate frequently, Claure said Son hadn’t signed off on Sprint’s new subscription plans.

“He trusts me -- I hope,” he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE