Sprint’s prepaid mixed blessing

Sprint’s two prepaid arms might be working against each other, but their competition is ultimately helping the carrier stem its subscriber loss. Sprint mobile virtual network operator Virgin Mobile recently announced it would lower its $80 unlimited plan to $50 per month to match the plan offered by Sprint’s other prepaid division, Boost Mobile. As a result, Sprint is gaining subscribers in prepaid — albeit at the expense of its postpaid business.

Sprint, the third-largest carrier, should have faster prepaid subscriber growth in the first quarter, according to Bernstein Research senior analyst Craig Moffett, but the growth ultimately could hurt its already struggling postpaid business. Moffett predicted Sprint will gain 300,000 prepaid subs in the first quarter, adjusted from his earlier forecast of a loss of 275,000 subs.

At the same time, using its resources on prepaid will result in a loss of 1.2 million postpaid subs, Moffett said, adjusting his original prediction of a 900,000 sub loss. Sprint, which has been working to improve its image with a new marketing campaign and more 4G WiMAX rollouts planned for the year, will gain 300,000 direct subs overall this year — an improvement, but not likely enough to spur a quick turnaround.

“Shrinking more slowly will not reverse the de-leveraging of Sprint's fixed cost infrastructure,” Moffett wrote in a research note. “Nothing less than actual subscriber gains will satisfy, and we are still cautious. … We believe expectations remain too high for wireless overall and remain cautious with regard to the big telcos as well.”