The New Sprint (NYSE:S) Strategy may Cost the Company in the Long Run
Sprint Corporation (NYSE:S) or better known as just Sprint (NYSE:S) is a well-known telecommunications holding company of the United States. It not only provides wireless services but is also ranked among the best global internet carriers. It’s the third largest name in the US wireless network operator as of 2014. By the end of 2014’s third quarter it served up to 54.8 million customers throughout the US.
But lately Sprint Corporation (NYSE:S) has been making headlines for completely different reasons. In its last quarter the company’s revenue was $8.49 billion, out of which it successfully managed to lose up to $765 million. A large portion of which Sprint Corporation (NYSE:S) claims went into the increase in selling costs, which further pressurizes the expenses of company in the future.
Sprint Corporation (NYSE:S) has also started a campaign, which aims at taking extreme measures to lure customers of AT&T (NYSE:T) and Verizon Communications Inc (NYSE:VZ) in. But this strategy so far has backfired and led the company into further losses; the strategy is risky and unpredictable.
Sprint Corporation’s (NYSE:S) aggressive strategy is as follows; if a Verizon or AT&T customer switches to Sprint (NYSE:S) starting Friday December 5th, their monthly plan will cost them half its original value. The user will be granted with unlimited talk time and texts to anywhere within the United States regardless of their existing plan.
The difference can be seen by comparing AT&T’s bill for mobile share of 15 GB and four lines that is worth $160 per month to Sprint’s (NYSE:S) same package worth $80. Not a bad bargain but the question is will Sprint (NYSE:S) be able to make money through these customers. Or the selling costs will keep taking a cut in revenues.
What is the price Sprint (NYSE:S) is paying for this deal and how does it affect the shareholders, all this needs to be considered. The announcement however dropped Sprint’s (NYSE:S) share value by 3%, taking it to $4.72, which is just above its 52 week low of $4.64; it is well below the company’s 52 week high of $11.47.
Companies every now and then take such gambles in order to attract new customers, boost sales for an eventual increase in revenues. But has the Sprint Corporation (NYSE:S) CEO Marcela Claure thought this plan through? According to speculators, Claure might have taken the decision a little too quickly. They see this move as a strategic blunder on his part.
Even though the idea at this point might seem brilliant but the new pricing scheme would show its side effects in the long run, costing Sprint Corporation (NYSE:S) hundreds and millions of dollars and by then it will be too late to pull out and a long road to recovery will start.
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Everything now depends on how the customers respond and how well Sprint Corporation (NYSE:S) performs to keep them onboard. Another important group of people that need to be taken care of are the shareholders. They need to be satisfied too for this plan to work out. Moreover Sprint Corporation (NYSE:S) needs to closely follow its competitors response to this strategy. It can be safely said that Sprint Corporation (NYSE:S) has its work cut out.