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Sprint: Prepaid Not Cannibalizing Postpaid

Sprint-Nextel Corp. has nothing to fear in its postpaid business from the prepaid side of the house.

That’s the word from CEO Dan Hesse, speaking to the Associated Press. It’s a notion Hesse dismissed, with contract-to-prepaid migration standing in the single digits, he said.

Sprint lost 991,000 net postpaid subscribers and gained 938,000 prepaid subscribers in the second quarter, prompting speculation that the lower-value prepaid segment might be a cannibalistic force for the operator.

Particularly since Sprint is beefing up its prepaid bona fides. It just bought its prepaid MVNO Virgin Mobile USA, while the Boost Mobile prepaid unit continues to be a highly profitable business for the carrier. Boost, of course, is competing with MetroPCS and Leap Wireless in a de facto $50 unlimited prepaid price war – a price war of which those suffering recessionary effects continue to take advantage.

It’s not just Sprint adding postpaid subs: T-Mobile USA added 268,000 prepaid subs for the second quarter, out of 325,000 net additions.

Subscriber adds are one thing, profit is another. Thanks to that price war, most prepaid-wireless operators saw declining profit for the quarter, including Leap Wireless and U.S. Cellular.

 

Concerns over squeezed prepaid margins were bumped up thanks to Page Plus Cellular’s unveiling of a $39.95-per-month unlimited voice and texting plan.


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