NEW YORK (AP) – Sprint CEO Dan Hesse said Thursday that only "a low single-digit percentage" of new prepaid customers are coming over from Sprint's more lucrative contract-based plans.
Sprint Nextel Corp. roiled the wireless market in February by introducing a $50-per-month unlimited-calling plan under its prepaid Boost brand, raising fears that it would undercut its own contract-based plans.
Sprint lost 991,000 contract customers in the last quarter, while gaining 938,000 prepaying ones.
In an interview Thursday, Hesse said the balance of customer growth should shift back toward contract-based plans once the economy improves. Prepaid unlimited-calling plans are cheaper than contract plans, but they often lack features like fast data access.
Despite the relatively low price, Boost Unlimited is "a very profitable plan for us," Hesse said.
He dismissed the idea of cutting the price of the Boost plan to match recent moves by competitors.
"We think it's priced where it should be," Hesse said.
Leap Wireless International Inc., a regional competitor providing prepaid unlimited service under the Cricket brand, cut prices on some plans Tuesday, a week after MetroPCS Communications Inc. did the same.
Phones for prepaid service are more expensive than those for contract plans, since the carriers don't subsidize them. But Hesse believes there's still room for higher-end phones in the category, eventually even "smartphones.” He cited the success of the Motorola i9, which Boost sells for $300. It includes a camera and GPS functions.
Also on Thursday, T-Mobile USA, the fourth-largest wireless carrier in the country, said it added a net 325,000 subscribers in the second quarter, with most of them choosing to prepay rather than sign two-year contracts.
The news cements this year's trend in wireless: The two biggest, Verizon Wireless and AT&T Inc., are attracting the valuable contract-signing customers, while Sprint Nextel and T-Mobile USA are competing with smaller carriers for lower-profit prepaying customers.