Sprint Matches T-Mobile’s Prepaid Plan Amid Merger Push

May 06, 2014 1:31 pm ET

(Updates with Sprint CEO’s comment in seventh paragraph.)

May 6 (Bloomberg) -- Sprint Corp. is introducing a cheaper plan for customers in the pay-as-you-go market today, squaring off against T-Mobile US Inc., the leading price discounter that it hopes to acquire.

The carrier is matching a $40 prepaid plan from T-Mobile’s MetroPCS brand. Sprint Boost customers will get unlimited messaging and calling with a 500-megabyte high-speed data allotment. A $50 plan with 2.5 gigabytes of data will stay in place, while a $60 service with a 5-gigabyte data allocation is also being introduced.

The competing services are a spillover from the price battles led by T-Mobile among the major U.S. mobile carriers as they try to lure monthly subscribers. Billionaire Masayoshi Son, who controls Sprint and has met resistance from regulators skeptical about a merger with T-Mobile, is also making efforts to recast any deal as being beneficial for consumers.

“We are shifting away from a one-size-fits-all approach to a more stratified set of plans,” said Dow Draper, head of Sprint’s pay-as-you-go service. “Prepaid has always been very competitive. After the first quarter we decided to broaden our offering.”

Under Chief Executive Officer John Legere, T-Mobile’s aggressive introduction of phone financing, cheap international rates and $650 buyout offers to get customers to switch service, helped it add more users in the first quarter than AT&T Inc. and Verizon Communications Inc. combined.

Price Breaks

Sprint, based in Overland Park, Kansas, lost 415,000 prepaid customers in the first three months of the year, a reversal of the 369,000 gained in the year-earlier period. The company attributed the drop to changes in recertification of its government-assisted Assurance Wireless program available to low- income families.

Price cutting isn’t necessarily sustainable, and it’s harder for smaller companies to bear, Sprint CEO Dan Hesse said in an interview on Bloomberg Television today.

“A strong No. 3 will get one and two to react more aggressively so everybody benefits,” Hesse said.

Consumers are enjoying the price breaks and smaller phone bills as a result of the accelerated competition. Verizon, the largest U.S. wireless carrier, recently matched AT&T’s price cut for big-spending, family-plan customers, which in turn was a move to get closer to the $140 a month T-Mobile charges for an equivalent package.

Legere is delivering on a promise early last year to shake up the U.S. wireless industry. He may also figure prominently should Sprint and T-Mobile combine.

Son, who is CEO of SoftBank Corp., which owns about 80 percent of Sprint, is expected to make a formal bid for T-Mobile in June or July, according to people familiar with the matter. His company and Deutsche Telekom AG, which owns about 67 percent of T-Mobile, are in talks to determine who would run the company and Legere is the leading candidate, one of the people said.