Even with a slew of imitators, Boost Mobile LLC’s $50 per month unlimited campaign is helping to stanch a wave of customer losses for parent company Sprint Nextel Corp.
Irvine-based Boost, which markets prepaid cell phones made by Sprint, has seen its customer ranks swell on the promotion, slowing Sprint’s rate of fleeing subscribers.
For the nine months through September, Boost added more than 2 million customers, according to Boost. Even with Boost’s gain, Sprint lost about 1 million customers in the period.
Boost’s numbers are the highest net customer addition in the unit’s history, according to Boost Mobile President Matt Carter.
Boost launched its $50 monthly unlimited deal at the end of January. It allows for unlimited calling, text messaging, wireless Web access and walkie-talkie service.
“What was innovative about it is that we clumped together all the fees,” Carter said. “While we thought that we would see some success, we didn’t think we would see what we have. It’s gone beyond our wildest imaginations.”
Boost marketed the $50 flat-rate deal heavily this year on TV, radio and billboards, as well as in print ads.
It focused on how consumers loathe all of the fees that get tacked on to wireless bills and set itself apart with slogans such as “$50 means $50.”
In addition to adding customers, the $50 plan also helped increase a metric closely watched in the wireless service industry: average revenue per user.
Sprint’s average revenue per prepaid user jumped to $35 in the third quarter, up from $31 a year earlier, according to Sprint’s results.
“It was a stellar performance for Boost within the context of the onslaught of imitators out there who have come out with plans to match us,” Carter said. “Given that competitive intensity, we held our own.”
With prepaid service, users pay for a set amount of calling time in advance (in Boost’s case, it’s a month at a time). The plans usually include basic phones that don’t have a lot of bells and whistles.
The catch with Boost’s unlimited plan is that it runs on a different, less robust Sprint network, known as iDEN.
Sprint made a big bet on the growth of its prepaid segment in July when it agreed to buy Virgin Mobile USA Inc., a prepaid competitor of Boost Mobile, for $483 million.
The deal is expected to close by 2010.
Until then, the company is keeping mum on its plans for Virgin. Chief Executive Dan Hesse has said that the company plans to keep both the Boost and Virgin brands operating independently within the unit.
The deal is set to make Sprint the second-biggest prepaid carrier, after Florida’s TracFone Wireless Inc., a unit of Mexico’s América Móvil SAB de CV.
“If you look at what elements of the industry are seeing growth, it’s prepaid,” Hesse said in a statement. “We’d like to be the leader in the prepaid, but it’s still a smaller part of Sprint’s business.”
Not There Yet
Even with Boost’s help, Sprint is far from out of the woods.
During the third quarter, Sprint lost 801,000 of its subscribers who signed contracts for wireless service. That’s bettered from the 1.3 million total subscribers lost a year earlier.
Sprint reported sales of $8.04 billion, down 9% from a year earlier. It widened its third-quarter loss to $478 million, compared with $326 million a year earlier.
Boost Mobile, which has about 245 workers in Irvine, came here in 2001 from Australia.
It got its start going after surfers and skateboarders and marketing to the under-35 set with edgy commercials and events.
More recently, Boost started going for broader appeal—families, baby boomers and Hispanics. Those are larger, more stable segments than the youth market.
The $50 monthly unlimited deal has spawned many imitators since Boost announced it at the end of January.
Leap Wireless International Inc., which operates the Cricket brand in the U.S., announced $40, $45 and $50 plans in February.
Deutsche Telekom AG’s T-Mobile USA Inc. tested out a plan in March and then rolled out a no-contract plan nationwide last month.
MetroPCS Communications Inc. jumped on board in March with a $50 unlimited plan for a particular lineup of BlackBerry phones.
Virgin Mobile launched a similar plan in April, before it was acquired by Sprint.
“Imitation is flattery, but it’s also a lot of headaches,” Carter said. “We anticipated that at some point the competition would respond to us.”
Boost had expected a price war where each carrier would try to undercut the competition—but it hasn’t happened yet.
The company instead is looking to compete on factors other than price, including customer service and a ton of new stores with hipper-looking phones.
“We want to compete on the totality of our value proposition,” Carter said. “We have to be two steps ahead.”
The stores sell prepaid phones and accessories. They also aim to be convenient spots for customers to add minutes to their plans or upgrade them.
The company expects to have 1,200 stores open in major markets by year’s end and has 800 planned for next year.
