Sprint’s Virgin Mobile to Welcome Prepaid iPhone Soon
Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Cricket is not alone. Sprint’s (NYSE: S) prepaid brand Virgin Mobile is to give it company soon after Cricket releases Apple’s (NASDAQ: AAPL) iPhone on a pay-as-you-go basis. Sprint is going to become the second prepaid carrier to provide the coveted iPhones on a no-contract and no credit check basis. The Kansas carrier is expected to announce this week that it will be offering the popular device on its Virgin Mobile pay-as-you-go brand as early as June 29. The news comes after Leap Wireless’ (NASDAQ: LEAP) Cricket Communication division announced late last week about its plans of selling the iPhone starting from June 22 under its $900 million three year deal with Apple.
Sprint vs. the biggies
Sprint began selling the iPhone under its brand since last October, when it struck the $15.5 billion four year deal with the iPhone maker to buy the device worth such an amount over the contract period. Since then, it has managed to sell about 3.3 million units in the first two quarters. Sprint, which sold 1.5 million iPhones in the first quarter, falls much behind the bigger players Verizon (NYSE: VZ) and AT&T (NYSE: T) which reported iPhone sales of 3.2 million and 4.3 million units respectively, for the same period. T-Mobile, which is the only national carrier that does not sell the iPhone, has started building its new HSPA+ network to resolve its incompatibility with the device.
Sprint vs. regional rivals
Clearly Sprint could not match up to the sales volume of the biggies. Now what about the smaller regional rivals? A number of them such as C Spire Wireless, Cellcom and General Communication are getting access to the device. This is making the task for Sprint challenging.
The company needs to satisfy its $15.5 billion commitment with Apple. Offering the iPhone under its prepaid brand will assist the company to avoid piles of unsold stock and meet its purchase obligation as per its Apple deal.
How much is Sprint’s Virgin Mobile going to charge for the prepaid iPhone?
Sprint shall sell the 16GB iPhone 4S for $649 and the older model iPhone 4 for $549, the full retail cost charged in Apple stores. Cricket announced to sell the devices at lower rates. It proposes to sell the16GB iPhone 4S for $500 and the older 8GB iPhone 4 model for $400. Cricket’s iPhone plan which includes unlimited usage of data while calling and texting will cost consumers $55 a month.
However, Virgin Mobile's iPhone data plan comes pretty cheap for $35 a month [$30 per month with discount for registered credit card] which includes 300 voice minutes, with quasi unlimited texting and a data plan. Quasi unlimited texting allows 3000 text messages* and 2.5GB of full speed data consumption per month, higher than Cricket’s 2.3GB. If a user consumes beyond the given text and data usage limit, Virgin does not charge extra but customers may experience slower speeds. When a new monthly plan is started, the meter is turned back to 0.
Also, if the customer signs up for online billing, the charge of the plan comes down to $30, much lower than Leap's $55 a month plan and less than half the price charged by other carriers for their most reasonable plans.
So Virgin's total ownership cost of the iPhone over a course of two years comes the cheapest at $1,370 compared to Cricket's $1,720 and the high average of $2,775 for other carriers.
What more is in favor?
Sprint has a much wider market than Leap’s Cricket which operates in smaller markets. Cricket has access to just 20% of the US population, roughly 60 million people, which lies within its network coverage to sell its phones. Virgin, which uses national carrier Sprint’s much larger network, has access to the entire country as it claims to cover 278 million people.
My takeaway
The prepaid no-contract iPhone is about to hit the market soon. Sprint may be the second prepaid carrier to offer iPhone, but it is the first one with national reach. The $35 a month plan charge clubbed with Sprint’s national reach is surely going to attract many who were earlier hesitant about signing a two year contract. The prepaid iPhone is not only going to attract the low-budget customers, but it’s also going to draw in more people who are turning their back on long term contract commitment.
*messaging - emails, IMs, text messages are unlimited
liveinvestor has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
