Sprint CEO Marcelo Claure criticised the tactics of AT&T and Verizon Wireless as he sought to establish his own company’s value-for-money credentials against the two larger rivals.
Claure (pictured) is engaged in a turnaround operation at Sprint with the ‘Cut Your Bill in Half’ promotion at its centre. The promotion has been extended to run through 2015.
“One of problems you have is that when you are spending less money than your competitors — even when you have the best promotion — this industry is not well known for the cleanest form of advertising,” said the Sprint CEO, appearing at the 2015 Citi Global Internet, Media & Telecommunications Conference.
“You see Verizon advertising a free phone. We all know there is no such thing as a free phone. It’s a free phone with a service agreement. Or you will see AT&T advertising no money down. While there is no such thing as no money down.”
Sprint’s competitors were being “louder than us”, he complained. The solution was to make “an important statement”. Hence, the aggressive stance of the “Cut Your Bill in Half” promotion.
However, such an aggressive promotion has obvious implications for ARPU and revenue, a point Claure sought to address.
“People might think we are lowering ARPU, but we are looking a total customer life value, or CLV. I would rather have a customer who will pay us $10 less but stay for 60 months then someone paying $10 more for only 24 months. You can do your own math. We feel incredibly comfortable in terms of ARPU.”
However, media reports last month said the Sprint promotion will actually only save customers about 20 per cent off their bill, a point acknowledged by the operator. The reason is that while the operator is halving the service cost, a new subscriber has to either lease or pay instalments on the full cost a new phone from Sprint.
Separately, Sprint closed $2.1 billion in vendor financing and loan deals. The three new vendor agreements totalling $1.8 billion were for the purchase of 2.5 GHz network equipment and related services.
In addition, the operator amended and expanded by $300 million its credit arrangement with Export Development Canada (EDC), as well as amending the terms of its existing secured equipment credit facility.
The financing arrangements are with three vendors. Firstly, a secured facility for up to $800 million from Nokia Networks maturing in June 2021. It is backed by credit insurance provided by Finnvera, the export credit agency of Finland.
Secondly, a secured facility for up to $750 million from Samsung maturing in December 2022. It is backed by credit insurance provided by the Korea Trade Insurance Corporation, the export credit agency of Korea.
Thirdly, a secured facility for up to $250 million from Alcatel-Lucent maturing in December 2021. It is backed by credit insurance provided by Delcredere Ducroire, the export credit agency of Belgium.
Alcatel Lucent also played a role in arranging the $300 million incremental facility from EDC, maturing in Dec 2019.
Finally, Sprint amended the terms of the secured equipment credit facility that it used to finance $1 billion in purchases of network equipment and related services from Ericsson.