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Ting’s Q1 Subscriber Growth Suffers from Sprint’s New Unlocking Validation Process

May 8, 2015 - Written By Lucius Bossio

Back in February, Sprint updated the process it uses to validate unlocked devices that customers want to utilize on other carriers or one of Sprint’s MVNOs. The new process, entitled “Financial Eligibility Date” (FED), was designed to ensure unlocked Sprint devices that are activated on another carrier have been paid for in full by customers who entered into a contract or monthly payment plan with Sprint. According to Sprint, many devices that were not eligible to be unlocked and activated on another carrier were able to slip through their validation process. Sprint requires any financial obligations stemming from of agreements (device or service) with customers be met before the customer is able to move their Sprint device to another carrier or MVNO. Although the new validation process appears like a good move for Sprint from a financial perspective it has caused major issues for Ting, an MVNO that utilizes the Sprint network, which has impacts the wholesale revenue they generate for Sprint, as many Ting customers’ devices have been deactivated.

During Tucows (Ting’s parent company) recent Q1 earnings call, CEO Elliot Noss reported that an alarming 70% of devices that people were trying to activate on Ting were rejected following Sprint’s implementation of FED. Of these rejected devices, many were perfectly eligible to be activated on Ting, which indicated Sprint’s FED process had many errors. Over the period of a few weeks Ting worked with Sprint to correct these errors, which resulted in the number of rejections falling to 30%, however, a few outstanding issues still remain. Obviously the issues caused by Sprint’s FED had a significant impact on Ting’s ability to acquire new customers. Their support team quickly became overwhelmed by customers complaints, which prompted Ting to shut down all marketing and promotional activities until they could handle the increased burden placed on their support team. According to Noss, giving every prospective customer an outstanding level of service is an integral component of Ting’s strategy as this is how the company expects to attract and keep customers over the long-term; apparently Ting is just getting back to an acceptable level of service and conversion rate on their activation process.

In Tucows earnings call, they reported that Ting added 9,000 accounts and almost 16,000 devices in Q1. Although activation issues didn’t cause a decrease in customers Ting was unable to maintain the 12,000 accounts and 18,000 devices the company added in the past few quarters. Despite the headaches and decrease in subscriber growth Sprint has given Ting there appears to be no love lost between the two companies. Noss has stated that Sprint’s desire to prevent customers from taking advantage of Sprint subsidies by shoring up its validation process is “completely appropriate”. While Ting and Sprint are continuing to resolve activation issues Sprint reacted promptly when Ting informed them of their customers’ troubles; Ting is frustrated by the technical implementation of some of the required fixes, but are very happy Sprint is taking the issue very seriously. It is no surprise that Sprint wants to get Ting’s customers back online. Ensuring that MVNOs utilizing Sprint’s network are as successful as possible is good for Sprint’s bottom line. Every inactive Ting customer results in lost revenue for Sprint; Ting must pay Sprint for all of the data their customers are consuming. Noss has noted that deactivating customers who owe the carrier a small amount of money from a long time ago may not be financially advantageous for Sprint.

While Ting’s issues have been astronomical other MVNOs have not been affected as heavily. Stephen Stokols, CEO of Sprint MVNO FreedomPop, reported that the new validation process is costing the company around 2,000 subscribers per month, which is not much considering how fast their subscriber base is growing. However, Stokols did note that Sprint should adjust its rules to be less stringent. Sprint spokesman John Votava has stated that MVNOs relying on BYOD programs (do not procure and offer their own devices) have been impacted the most by FED. Ultimately, Votava claims, the program works exactly as it was designed; it is preventing the activation of all ineligible and fraudulent devices.