Sprint Is Prepping To Start A Price War, But Will Competitors Take The Bet?

(Misfit Photographer)

Earlier this week, Sprint abandoned months of planning for a takeover of T-Mobile and fired CEO Dan Hesse after seven years of failing to make the company competitive with Verizon or AT&T. Now Sprint’s Chairman says the new CEO is prepping to start a price war to win over customers, but is Sprint really in a position to pick that fight?

Sprint Chairman Masayoshi Son, whose SoftBank gained control of America’s third-biggest wireless company in 2013, today described incoming Sprint CEO Marcelo Claure as a “street fighter” with a face “like a bandit.”

“He is a man who has a very similar culture to SoftBank,” said Son.

Claure is the billionaire founder of Miami-based Brightstar, a wireless wholesaler that was also recently acquired by SoftBank.

“When he came to the U.S., he had only $100 in his pocket and then he made a company with sales of 1 trillion yen,” said Son. “In that sense, he is the street fighter.”

Son confirmed Claure’s comments from earlier this week that his focus is on Sprint’s costs. He also said that the new CEO is working on new pricing plans for the company.

“Without the ability to compete on scale they are going to have to compete on price,” an analyst from Moody’s tells Reuters about the position that Sprint and T-Mobile find themselves in. “The two smaller competitors may become increasingly desperate to maintain market share and could become irrational in pricing, which could cause disruptions in pricing in the industry.”

The question is whether or not Sprint, which has failed to make much of a dent with either its aborted early upgrade plan or its Framily group plans, has the leverage to launch or endure a price war.

“Domestic competition among mobile carriers is fierce, but I don’t think it will get much worse,” another analyst tells Bloomberg.

T-Mobile has been trying to disrupt the industry since its merger with AT&T fell apart. And while it has gained millions of new subscribers, there are those who question the company’s ability to maintain its pricing model in the long run.

And yet, others in the industry — especially AT&T — have responded to T-Mobile’s changes, nudging customers into plans where they save money by paying full price for their phones.

But the big difference between T-Mobile and Sprint right now is that T-Mobile’s network investments are paying off. As we talked about yesterday, the company may be exaggerating the performance of its LTE network, but not by too much. Meanwhile, those same tests show that Sprint is by far the slowest of the four major providers.

So will AT&T and Verizon, or even T-Mobile, care if Sprint drops its price? Possibly not, unless Sprint can demonstrate drastic, widespread improvements in its network.

As the way things stand right now, Sprint trying to goad its competition into a price war would be like Amtrak trying to convince airline passengers to switch.

by Chris Morran via Consumerist