Sprint lost an alarming 264,000 prepaid users in the first quarter of the year, partly because of increased competition from rival carriers like AT&T and T-Mobile and partly because it chose to concentrate more on its Boost brand which is designed to bring in higher profit margins. Considering that Sprint had added 546,000 net prepaid customers in the first quarter of 2015, the drop in the number of prepaid users in just a year can be termed as substantial. However, Sprint is optimistic and is hoping that a major revamp of its Virgin brand with a stronger value proposition later this year should turn the tables on the disappointing quarterly results as far as prepaid is concerned.
Marcelo Claure, CEO at Sprint, said that even though the carrier lost many prepaid customers in the quarter, the overall prepaid segment delivered 'positive value contribution' in the period. He added that the Boost brand, which is designed to bring in higher profit margins than other prepaid brands, actually added more customers than it lost in the quarter. Hence, Sprint's overall returns from its prepaid services was encouraging. According to a recent Wave7 research, Sprint is slowly but surely phasing out its branded prepaid services. The research noted that while Sprint Prepaid is available at Sprint's retail outlets, RadioShack and Kmart, it is quickly disappearing from Target and Best Buy stores. However, the carrier still considers prepaid as top priority and instead of investing in branded prepaid services, is giving added impetus to its dedicated prepaid brands like Boost. A few days ago, Sprint merged its Assurance Wireless segment with i-wireless to offer prepaid services to low-income consumers across the US as part of Universal Service Fund's Lifeline Assistance Program.
Sprint CEO Claure gave an impression that Sprint probably expected the sharp fall in its branded prepaid customer base and is following a clear-cut strategy which involves sacrificing certain services in favor of more profitable ones. "While our losses were in areas we are de-emphasizing such as pay-as-you-go space, we're also in the process of relaunching our Virgin brand this year with a much stronger value proposition. Virgin is going through a transformation and will be a very different carrier than it used to be," he said. As recently as in February, Sprint overhauled Virgin Mobile's pricing structure as a response to a majority of prepaid customers who prefer monthly plans. The new pricing structure included free calls and texts in all existing plans but introduced variable rates on data consumption which started from $30 per month for 500 MB of data. Other plans included a $40 per month for 4GB data and $50 per month for 6GB data. These plans also offered free music streaming from Pandora, Slacker, iHeartRadio, and Samsung Milk.