Tuesday, August 19, 2014

Bullet Point Analysis: The Significance of Sprint's New Family Share Pack $100 Promotion

WHAT IS IT?

After much speculation and talk, Sprint finally announced its new Family Share Pack plan, 12 days after new CEO Marcelo Claure took over for Dan Hesse. The new plan structure that begins August 22 mirrors that of larger competitors Verizon Wireless and AT&T in that:

  • Account subscribers share a bucket of data (vs. individual levels (i.e., Sprint Framily & T-Mobile's Simple Choice Family)
  • There are multi-tiered data options
  • Subscribers have an access line charge per device but gets less expensive after a specific data threshold
  • 'Phone' (feature & smartphone) access line charges differ in full pay (Easy Pay) vs. the traditional 2-year option
  • Flexibility to add on devices (e.g., mobile broadband hotspots and tablets, maybe in the future wearables or cars) 

Promotion:  
  • From August 22 to September 30, a family with up to 10 lines gets 20GB of Shared Data and Unlimited Talk & Text through 2015 plus an additional 2GB of data per line up to 10 lines for $100.  
  • Waiving device access fees for plans >20GB, up to 10 lines (switchers only)
  • Coupled its long running up to $350 switching credit (Sprint retail and telesales

ANALYSIS

  • First and foremost, Sprint delivers on aggressive pricing. Its use of the $100 price point is easily understood and counterpunches against T-Mobile's lead family offer. At the same time, it presents an advertised $60 price gap against Verizon Wireless and AT&T.  
  • Mimicking AT&T's and Verizon Wireless' data share plans is important as it signals Sprint's intention to go after larger competitors' subscribers.  While T-Mobile has formidable momentum, fighting against a competitor with just 24.5 million postpaid customers makes no sense. Rather the fruit is going after the combined ~174 million AT&T and Verizon Wireless postpaid base.  Now Sprint has a simple apples-to-apples comparison for sales reps to show both data value and a large pricing gap.  
  • Mirroring competitors' data share plans is essentially adopting a "best practice."  Both AT&T and Verizon Wireless have discussed not only the the anti-churn merits of these data share plans, but also their subscribers' trend to add additional devices/lines. This bodes well for increasing data ARPU/ARPA/ABPU. 
  • Family Share Pack allows for an easily understood way of adding connections for devices, in the short term tablets but in the future, automobile connections and wearables.
  • The new plan structure de-emphasizes the previously touted Unlimited differentiation though that is to be expected to continue with the yet to be launched individual $50 unlimited plan. 
  • Finally, the promotion comes at the right time in Q3 and not Q4:
    • Sprint needed to get this plan in place before the new iPhone model(s) are announced and launched. Apple is supposedly unveiling its new iPhone (s) on September 9. Historically, these new devices are available about 10 days after announcement. For 2014, September 19 is interestingly a Friday and follows past availability trends.  Therefore having a new plan in place for this event is essential for retaining and switching the Apple loyalists and early adopters upgrading within two weeks of availability.  
    • T-Mobile CEO Legere has put much stock into calling the new iPhone launch as a prime postpaid switching event for T-Mobile. With Sprint's new pricing and data value, it blunts T-Mobile's encroachment on to the Sprint base. Moreover, with a more price sensitive demographic (than AT&T and Verizon Wireless), T-Mobile may be vulnerable for those subscribers who want to chase price.
    • The September 30 promotion end of life gives urgency to fence sitters to get a very low $100 price and generous amounts of data in the two sweet spot of iPhone upgrading.  Moreover, it neatly closes the door on Q3.  If Sprint doesn't market this urgency with marketing and sales rep training, then I'd be shocked and disappointed.
COMPETITIVE IMPACT?
  • It's likely all competitors will hit Sprint's network and its poor speed performance. To be fair, Sprint's LTE  highway (5X5 MHz) in the PCS 800 MHz band doesn't help a speedy experience. The high speed potential 2.5 GHz markets are still in buildout mode and only 100M POPs covered by end of year 2014.  Competitors are already expanding their LTE highways (AT&T (no branding), Verizon xLTE and T-Mobile Wideband LTE are being advertised and marketed heavily).
  • T-Mobile CEO has already started on the attack on the day of Sprint's announcement  A look at his Twitter feed telegraphs T-Mobile's likely competitive pushback in store rep messaging and likely advertising.  The fact that a well produced graphic and amount of attacks shows how serious T-Mobile is taking Sprint's move.  
  • UPDATED: Aug 21- T-Mobile has announced a bounty for Sprint subs, essentially giving its customer advocates unlimited LTE data for 12 months or for unlimited customers, a $10/month credit for a year. 
  • It's unclear how AT&T and Verizon Wireless will respond beyond the easy attack on Sprint's network. These conservative competitors have not traditionally responded immediately against smaller competitors. The 2014 AT&T and Verizon Wireless plan moves have largely been against each other.  It's likely that they are feverishly working up plan response scenarios based on how the port-out view looks. Everyone in the carrier industry knows that Q4 and Q1 are hugely important battleground quarters and a strong response will be necessary.
  • Can AT&T and Verizon Wireless be drawn into dropping price or providing more data? It remains to be seen. Looking ahead, Sprint promises this is but one plan move with more ahead, presumably the $50 unlimited individual plan.  Yet Sprint can do more if it has the mettle. That is to complement its plan pricing with device pricing. Sprint has already talked up Brightstar device buying synergies. If this can leverage to a lower phone and plan price selling strategy, it would be pretty formidable.  

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