DirecTV’s 20 million U.S. customers are now part of the AT&T family, but that does not mean they have to subscribe to AT&T’s wireless service, so Sprint is offering DirecTV customers a year of free wireless service. All DirecTV subscribers are eligible, even those who are already Sprint customers.
Sprint is offering one year of free talk and text, plus 2 gigabytes of data per line for up to five lines. The carrier will pay early termination fees and cover a customer’s remaining device payment fees up to $300. The offer is set to run through September. In order to qualify, customers need to pay full retail price for a smartphone or add a new line of service through Sprint Lease, iPhone Forever or Sprint Easy Pay. Existing Sprint customers need to add a new line in order to qualify.
The move is timed to capture the DirecTV customers who are not yet with AT&T, which is now in a position to offer bundled TV, Internet and wireless service. AT&T is offering DirecTV subscribers a $500 bill credit for each line of mobile service they bring to AT&T Mobility. That equates to a credit of almost $42 per month, per line, making AT&T’s offer comparable to Sprint’s.
But free is a powerful word, and Sprint is sure to win new customers with its offer. The carrier recently lost the No. 3 position in the market to T-Mobile US, which has been setting the pace in the carrier price wars. Now Sprint has shown that it is also capable of taking the lead, and of directly targeting a rival.
Free wireless service, which Sprint has offered before to select groups of customers, could also make financial sense given Sprint’s current position. The carrier has already committed to significant investment in its network, so the cost of supporting more customers is already part of Sprint’s plan. The company is also creating a separate device-leasing entity in partnership with its Japanese parent company SoftBank. Sprint will lease phones from the new company. If it can lease them for less than it charges customers to lease those phones, Sprint could make money from new customers even if they don’t pay for service for a year.
Analyst reaction
Analyst Derek Kerton said Sprint’s move borders on recklessness, and seems very much like something T-Mobile US CEO John Legere would do. But he said the carrier needs to take action to reverse its current course.
“They have more spectrum than anyone, but they are always playing catch-up on capital and customers,” Kerton said, explaining that Sprint has struggled to raise capital because it does not have the customers to support large predictable revenue streams. Kerton added that the key for Sprint will be converting its new DirecTV customers into paying subscribers when the year is over.
Sprint veteran Jim Patterson thinks the offer will appeal primarily to customers who are not heavy data users, noting that Sprint will charge 1.5 cents per megabyte for data overages. He also thinks that many customers will prefer bundled service from AT&T to temporarily free service from Sprint.
“I admire Sprint for their bold efforts, but breaking AT&T’s bundle is going to require cooperation with the cable companies,” said Patterson.
