If unlimited data doesn’t work, someone’s going to have to explain to me how Verizon is stealing all of Sprint’s customers all of a sudden.
At a Deutsche Bank investor conference on Tuesday, Spring CFO Tarek Robbiati confirmed (in a rather roundabout way) that Verizon’s push on unlimited data is hurting Sprint’s numbers. “The rise in competitive intensity has probably triggered a little bit more churn than we thought,” he said. “We see churn to be relatively stable for the quarter. We had foreshadowed before that churn would be coming down over the quarter.”
Churn is the turnover rate of customers, so that’s a euphemistic way of Sprint saying it’s losing customers. Robbiati also said that unlimited data pricing is hurting profit margins, and the combination of those comments sent Sprint’s stock price down by five percent.
Sprint has been forced to cut prices to stay competitive. Since Verizon launched an aggressively-priced unlimited data plan in February, T-Mobile has improved the quality of its unlimited plan, and even AT&T has launched unlimited options. Since Sprint’s network struggles to compete with the other three networks, the only recourse has been to cut prices.
Unfortunately for Sprint, that has squeezed profit margins and reduced even further the available cash to invest in the network. It’s a vicious cycle: Sprint loses customers, can’t invest in the network, and then falls even further behind compared to the competition.
The long-term plan for Sprint seems to be to pursue a merger. The obvious candidate would be T-Mobile, which would be bittersweet news for customers. Although a combined Sprint/T-Mobile network would have a highly competitive network with tons of available spectrum, it would mean one less carrier to compete. In particular, Sprint’s normally been aimed at the bottom of the market price-wise, and with no downwards pressure on prices and unlimited plans across the board, it’s easy to see the lowered competition causing prices to creep back up.