U.S. provider Sprint Nextel announced that it will be cutting the price of the iPhone 4S by $50. For the 16GB version of the device, the new price will be $149.99, as against $199.99 from both Verizon Wireless and AT&T. Sprint is also waiving its $36 activation fee if customers subscribe for the iPhone 4S via the provider’s website. In addition, the company has another promotion between 14 August and 26 August that offers a $100 American Express gift card to any customer buying a new Smartphone online in connection with a new line of service, which effectively reduces the price of the iPhone 4S to just $49.99.
In keeping with its status as a distant third among mobile providers after Verizon Wireless and AT&T (and also third chronologically with regard to adoption of the iPhone), Sprint’s second-quarter iPhone sales lagged significantly behind those of its competitors. Clearly, one aim of this promotional effort is to narrow that gap. (It will also help to reduce inventory of the 4S in preparation for the expected launch of the iPhone 5 in September.) However, other players, including Apple itself, quickly lowered their prices to match Sprint’s, thereby offsetting much of the advantage Sprint might have hoped to achieve from this pricing strategy.
But in Tarifica’s estimation, another aspect of Sprint’s marketing moves has far more significance and offers an important lesson for other second-tier providers. Besides its price breaks on the iPhone, Sprint is the only one of the top three U.S. mobile service providers to offer truly unlimited data on new plans (no throttling). And, it is doing so at a very competitive price of just $79.99 per month, postpaid. Given the increasingly data-hungry marketplace – the importance of which we have been emphasizing for some time – the best and potentially only hope for Sprint, and other MNOs in similar circumstances, to catch up and enter the top tier lies in offering an unlimited data allowance.
Therefore, we would advise any operator that is not currently a leader in its market, but that wishes to become one, to acquire all the extra capacity it can in order to provide unlimited data. The resulting cost may lead to a fair amount of financial pain in the short and even medium terms. But putting up with that pain appears to be the only way for these providers to move ahead to long-term competitiveness and profitability in a marketplace where dominant companies, such as Verizon Wireless and AT&T in the U.S., have them at a disadvantage in fiscal might and momentum.