The battle over prepaid between T-Mobile USA and Sprint Nextel's Virgin Mobile just got a little uglier.
T-Mobile and its ever-present spokeswoman, Carly, were the targets of a new commercial from Virgin, which argues that it offers the best value for a smartphone customer looking to avoid long-term service contracts.
The advertisement underscores the growing importance of the prepaid wireless business for the national carriers, which traditionally generated a bulk of their revenue with contract customers. As both Sprint and T-Mobile have struggled with the so-called postpaid segment--that is, subscribers--they have looked to add prepaid customers. As a result, the two are beginning to butt heads.
Both Sprint and T-Mobile reported strong prepaid numbers in the second quarter. Sprint added 674,000 net new prepaid subscribers--with Virgin Mobile a contributor to that total, while T-Mobile added 231,000 net customers despite another ugly quarter for postpaid losses.
The move also comes as the industry figures out just how much growth is left in the prepaid business, with many of the traditional providers such as MetroPCS and Leap Wireless reporting disappointing results in the second quarter.
The prepaid business, which generally attracts lower-income and credit customers, has been using smartphones to keep growth going. CNET editor Jessica Dolcourt recently took a look at the smartphone lineups for the various prepaid carriers, and found Virgin with the highest percentage of smartphone users at 30 percent. She also noted that it had the strongest selection among the tier-two carriers.
Dolcourt also noted that the Motorola Triumph was a real winner among options for prepaid customers.
T-Mobile, however, has moved to offer all of its phones without a contract, and has cut the price of its smartphone data plans to compete at the low end of the market.
"From our nationwide 4G network to our lineup of innovative and affordable smartphones, tablets and broadband devices, there is no better time than now to become a T-Mobile customer or upgrade your service or device," said company spokesman Hernan Daguerre.
Virgin offers a $55-a-month plan with unlimited calling, data messaging, and Internet access. T-Mobile offers a similar plan for $50 a month. Both throttle excessive data users.
Virgin is attempting to halt T-Mobile's momentum. Its advertisement points out the "depressing" and sparse look of the trademark all-white T-Mobile commercials, and opens up to a scene at a nightclub--falling perfectly into the demographic that the youth-friendly provider is targeting.
The commercial also reminds consumers that T-Mobile will likely be swallowed up by AT&T, and warned of a potential drop in customer service.
Updated at 11:07 a.m. PT: With a comment from T-Mobile. Correction at 9:30 a.m. PT: This story initially gave the wrong price for T-Mobile smartphone plan. It is $50 a month and not $59.99.