Despite the number of its subscribers that were boosted after Sprint Corp (NYSE:S) launched an unlimited data plan, the wireless carrier is now seeing a decline after Verizon Communications Inc. (NYSE:VZ) followed suit and introduced a similar data plan. This was disclosed by Tarek Robbiati, Sprint’s CFO, during an investor conference organized by Deutsche Bank.
“The rise in competitive intensity has probably triggered a little bit more churn than we thought. We see churn to be relatively stable for the quarter. We had foreshadowed before that churn would be coming down over the quarter,” said Robbiati.
Profit margins on a downward trend
Sprint’s finance chief also added that the data plans were priced at too low a level and profit margins were likely to decline.
The churn rate at Sprint in the last quarter was 1.67% compared to 1.62% that was recorded 12 months earlier for the same period. This churn rate was recorded despite Sprint offering some of the lowest prices with its data plans. At only $90 a month, two to five subscribers can enjoy unlimited data compared to other wireless carriers which charge double that.
The chief executive officer of Sprint, Marcelo Claure, revealed that Verizon’s new data plan caught them by surprise. Furthermore, the head of finance at Verizon then, Fran Shammo, had criticized the unlimited data strategy as being unnecessary and un-economic. Executive changes at Verizon, however, seem to have changed the strategy of the wireless carrier.
Data plan war
While it was T-Mobile US Inc (NASDAQ:TMUS) that started the data plan war when it started offering unlimited data beginning last year in August, executives at Sprint maintained that they had a similar plan that had been in the pipeline longer. At the time, AT&T Inc. (NYSE:T) was already offering unlimited data, albeit expensive. AT&T’s unlimited data was also restricted to subscribers of its pay TV service.
At the same investor conference organized by Deutsche Bank, John Stratton, Verizon’s executive VP said that despite their unlimited data offering having been launched just a few weeks ago, it was already garnering encouraging interest.