Sprint (NYSE:S) has lately been doing very well in the prepaid mobile plans market. Sprint’s prepaid share of the US mobile market has increased from around 1% in 2005 to around 4% in 2009 [1], with significant growth seen in 2008 driven by the Virgin Mobile acquisition. Although Sprint still owns a very small share of the prepaid market, the rapid growth should boost its confidence to compete effectively with telecom bigwigs AT&T (NYSE) and Verizon (NYSE:VZ).
We estimate Mobile Plans & Phones constitute around 42% of Sprint’s stock price. We currently have a Trefis price estimate of $4.79 for Sprint Nextel’s stock, about 4% above the current market price of $4.60.
According to a ComputerWorld article, sourcing IDC research, reports that out of 4.2 million net subscribers added in Q4 2009 by the nine largest US wireless carriers, about 65% were prepaid subscribers [2]. This amounts to 2.7 million net prepaid subscriber additions. A prepaid plan from Sprint can result in lower costs for some customers compared to postpaid plans.
Sprint’s two new CDMA handsets and the first BlackBerry under the ‘Boost Mobile’ brand have created significant demand for company’s prepaid offering. With the acquisition of Virgin Mobile, the company now has the second largest prepaid customer base of about 10.7 million [3], about 3.7 million less than leader TracFone. Sprint is likely to capitalize on more such opportunities to increase its market share.
The average of Trefis member forecasts for Sprint’s Prepaid Share of the Mobile Market indicate an increase from 4% in 2010 to 4.4% by the end of the Trefis forecast period, in-line with the baseline Trefis estimate.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Sprint’s stock to Prepaid Share of the Mobile Market.
Our complete analysis for Sprint Nextel’s stock is here.
Notes:
1. Sprint’s Prepaid mobile market share is calculated as: Sprint’s Prepaid Subscribers / US Mobile Subscribers. Sprint reports prepaid subscribers in its SEC filings. Data on US mobile subscribers is taken from CTIA Wireless Association Year-End Survey Report.
2. Prepaid wireless market hot in U.S. during recession
3. Reported by the company
