In case you thought Sprint’s (NYSE:S) puny LTE coverage would play a role in increasing its churn rate, the company CEO Dan Hesse has a stat for you. Speaking at the Goldman Sachs Communacopia Conference, Hesse said that Sprint has managed to sell 1 million LTE devices so far despite what is being perceived by many as LTE disadvantage. While 1 million LTE customers may not be many, it is still 3% of Sprint’s postpaid base. Considering that Sprint has just started its LTE buildout, the achievement is no small feat if you were to compare it to Verizon (NYSE:VZ), the largest U.S. wireless carrier. Verizon started its LTE rollout in late 2010 and now has a LTE network that covers more than three-fourths of the U.S. population, but it has managed to convert only about 12% of its postpaid base to LTE.
Unlimited plans remain highly valuable
- How Did U.S. Wireless Stocks React To Brexit?
- Explaining The Recent Sprint Rally
- How Leveraged Are U.S. Wireless Carriers?
- Why Do U.S. Consumers Pay Significantly More For Wireless Services?
- Why Is T-Mobile’s Valuation Per Subscriber Ahead Of Sprint’s?
- What Has Driven Sprint’s Recent Margin Expansion?
Clearly, Sprint is reaping the benefits of LTE gradually seeing more consumer interest with the technology maturing and increasingly being used in some high-profile smartphone launches such as Samsung’s Galaxy S III and more recently, the iPhone 5. What has also helped is that the carrier has continued to differentiate itself from rivals through effective marketing of its unlimited plans. It has also worked in Sprint’s favor that rivals Verizon and AT&T are distancing themselves from unlimited plans further. Both stopped offering unlimited plans to new subscribers a year ago, and now Verizon has stopped its grandfathered unlimited users from availing handset subsidies if they choose to keep their plans. (see Verizon’s Share Everything Plans Could Kill The Last Unlimited Plans)
It is likely that AT&T, having made its displeasure with unlimited plans clear on many occasions, will also come up with similar ways of discouraging usage of unlimited plans as it follows in Verizon’s footsteps and promotes its own tiered data share plans. (see AT&T Looks To Reduce Subsidy Pressures While Boosting Revenues Through Shared Data Plans)
LTE disadvantage is only near term
As more people use LTE, we expect many to find unlimited plans more valuable for LTE than they were for 3G since LTE is a higher-speed technology and can easily make subscribers overshoot their monthly quota for tiered plans. In such a scenario, customers might find sticking with Sprint more beneficial especially as the carrier ramps its LTE rollout to increase coverage to 123 million POPs by the year-end. If Sprint achieves that target, it will be within striking distance of AT&T which plans on covering 150 million POPs by the end of the year. Both will still however lag Verizon, which plans on having 260 million POPs under its LTE umbrella by the end of 2012, by a significant margin.
However, Sprint has set aggressive targets for its Network Vision plan and it plans on completing most of its LTE nationwide buildout by the end of next year. So there should not be much of a difference in LTE coverage between the top three carriers for long, inducing many to see the long-term benefits of choosing a carrier that has promised to keep its plans unlimited for LTE as well. As LTE adoption rates rise and increasing smartphone usage brings in highly lucrative postpaid subscribers, we expect to see Sprint’s data ARPU levels rise in concert. Sprint’s LTE plans will continue to help it maintain its niche and differentiate from rivals as long as they choose to keep them unlimited, especially at a time when wireless subscriber growth has nearly saturated.