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Sprint cuts rates, CEO says more new plans to come

Sprint on Monday unveiled a new pricing plan that offers customers 20 gigabytes of data and up to 10 lines for $100, doubling its data offerings, the latest in a string of price cuts and promotions sweeping the wireless industry.

Sprint's chairman, business tycoon Masayoshi Son, is betting new prices will revive a carrier hampered by an expensive network overhaul and rising competition.

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"The message is simple: We are back in the game. We are going to offer most competitive value for American consumers," Marcelo Claure, Sprint's newly appointed chief executive told Reuters in an interview.

The company will release new plans for individuals later this week.

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The announcement marks the first move for the new CEO, who last week said cutting prices would be his top priority.

The move comes after Verizon slashed prices for its unlimited talk and text plan and T-Mobile expanded its family plan to 6 lines and could signal more price cuts ahead for the industry as a whole.

Sprint is going it alone after scuttling a months-long effort to pursue a merger with No. 4 U.S. cellular provider T-Mobile US.

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Last year, an aggressive campaign by T-Mobile to address subscriber frustrations and lower prices sparked a domino effect that caused the U.S. top four carriers to restructure pricing plans and cut rates to lure customers in a nearly saturated market.

But analysts worry the industry's latest discount spree could increase pressure on already tight margins and rattle dividends.

While top carriers AT&T and Verizon have largely been able to mitigate the impact of T-Mobile's discounts on their subscriber base, they would likely have to respond to price cuts at Sprint with steep discounts of their own to keep subscribers from migrating, analysts said.

"We will see a trickle down in pricing concessions across the industry. This is the start of a price war many anticipated would be coming," said Angelo Zino, analyst at S&P Capital IQ.

New pricing plans that charge customers separately for the cost of their devices have somewhat offset price cuts this year, Zino said, but if the discounts continue, they could pose a long-term threat to the dividends.

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Son, CEO of Sprint's parent company, SoftBank, said earlier this year he wants to start a "massive price war" in the United States and warned that with Claure as CEO price competition will likely heat up.

But many question whether Sprint, with $27 billion in net debt according to the company's latest filings is in a financial position to fuel a price war with its competitors.

"Do they have the balance sheet? Not really, but the good news is that they have a major investor in SoftBank, so they have the potential to get more aggressive" said Zino.

By Reuters

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