Sprint Nextel is teaming up with Wal-Mart to offer a new prepaid mobile phone service for consumers who don't use their cell phones much.
On Thursday the No. 3 wireless operator in the U.S. announced the new Common Cents prepaid mobile phone brand. This new plan charges customers 7 cents per minute for phone calls and 7 cents per text message. Wal-Mart plans to offer the phones, which will range in price from $20 to $70, in more than 700 stores. And it will sell the devices next to another low-cost prepaid brand, Tracfone, which uses Verizon Wireless' network.
In an effort to attract value customers, Sprint will be giving customers a break by rounding down on the minutes used. For example, if a call goes to 1:46 minutes, Sprint will only bill the customer for 1 minute, instead of rounding up to 2 minutes. Sprint says that "with minutes that round down after the first minute, not up, consumers get more minutes for their money." Consumers will be able to use a phone card or pay online with a PayPal account to add money to their service.
"In recent months, consumers seeking no-frills, pay-by-the-minute plans have been somewhat overlooked with the popularity of unlimited plans in the market," Dan Schulman, president of Sprint's prepaid group, said in a statement. "These customers want to stay connected--to a point--but don't want to waste time or money on services they don't use. The addition of Common Cents combines easy-to-use handsets with a simple pay-by-the-minute service that can save them money."
The new Common Cents service is the latest prepaid cell phone brand that Sprint Nextel has introduced. Over the past year, the company has been relying more heavily on its prepaid business. In July last year, the company struck a deal to buy prepaid brand Virgin Mobile for $483 million. Sprint offers two other prepaid brands, Boost Mobile and Assurance Wireless, which is a government-subsidized cell phone program for people who are under or close to the poverty line.
Prepaid subscribers pay for service in advance instead of signing a contract and paying for service at the end of the month. Traditionally, prepaid customers have generated less revenue and have been less reliable customers than postpaid contract customers, who pay more and are locked into a contract.
As wireless penetration reaches over 90 percent in the U.S., customer growth in the wireless industry appears to be in the prepaid market. In the first quarter of 2010, Sprint lost 578,000 postpaid subscribers. But it gained 348,000 prepaid customers.
Sprint has been expanding its prepaid offerings. Its Virgin Mobile and Boost brands have been offering flat-rate pricing for all-you-can-eat plans for $50 a month. Soon Virgin Mobile will also offer a $25 plan that comes with unlimited texting, e-mail, and Web surfing, plus 300 minutes a month of voice service. For $40 a month, customers can get 1,200 voice minutes.
While Common Cents is geared toward value customers, who aren't looking for much beyond basic cell phone and texting service, Virgin Mobile's and Boost Mobile's services offer more data-centric plans that target the youth market. Young people tend to text and e-mail more than use their phones to talk.
Sprint may be the most aggressive of the national carriers when it comes to prepaid, but other major operators such as Verizon Wireless are also starting to pay more attention to this market. Prepaid subscriber growth grew faster for AT&T and Verizon during the first quarter of 2010 than post paid subscribers.