What Sprint's Upcoming Price War Means for Your Wireless Bill

Who says you can't teach an old dog new tricks? Looking back at third-place telecom giant Sprint (NYSE: S  ) , it's truly remarkable just how far the company has come in the span of three years.

Rewind to late 2012 and early 2013, and Sprint appeared to be on death's doorstep.

Source: Sprint

The company was hemorrhaging money, its stock price had fallen by more than 50% from just six months prior, and a once-promising multibillion-dollar investment had transformed into a massive financial headache for Sprint. 

Fast-forward to the present, and today's Sprint has gained an entirely new lease on life, thanks in no small part to the timely cash infusion from now-majority investor Softbank. As a result, Sprint has signaled its intention to take on industry heavyweights AT&T and Verizon Communications in the months ahead, and consumers should be paying attention.

Sprint reaches a turning point
As the result of a number of factors, Sprint plans to cut prices in hopes of stealing customers from the likes of AT&T and Verizon Communications. And while Sprint has remained tight-lipped in the way of details, this should undoubtedly prove a win for U.S. wireless consumers.

So, where does Sprint's newly found financial flexibility come from?

Several places, actually. For starters, Sprint recently abandoned its attempted $32 billion merger with the nation's fourth-largest telecom company, T-Mobile, which gives it additional short-term financial flexibility that it originally hadn't expected. Beyond the scrapped T-Mobile deal, Sprint also expects to conclude the rollout of its Network Vision LTE network investment program as well, although many agree Sprint's network will still require some degree of ongoing investment over the long term. Combine these two factors with the willingness to lose money in the short term in order to gain customers, and Sprint could present a formidable challenger to AT&T and Verizon.

What this means for consumers
The tried-and-true maxim "when companies compete on price, consumers win" should certainly apply here for U.S. telecom subscribers.

Renewed competition has been one of the primary themes we've seen at work in the U.S. telecom space over the past 12 months or so. T-Mobile, under the outspoken leadership of Jon Legere, has aggressively attacked the likes of Verizon and especially AT&T with its Uncarrier campaigns. Now with Sprint apparently taking a similar tactic, the pricing competition should only increase.

We've already seen T-Mobile's tactics bear some fruit in terms of driving positive change for the consumer. In early 2013 T-Mobile officially introduced its Uncarrier plan, and ever since it has been a major agent of change across the industry. AT&T, Verizon, and Sprint have all responded in their own various ways over the past year or so, but the point that T-Mobile's boldly competitive action has driven down prices for consumers for at least some plans for U.S. wireless consumers is beyond question. T-Mobile appears poised to continue to push the envelope--just last month, it announced a still-cheaper update to its Uncarrier plan. And with Sprint entering the fray, expect competition to increase and prices to fall, all to the consumer's benefit.

Masayoshi Son. Source: Softbank.

Sprint Chairman and CEO of its majority-owner Softbank Masayoshi Son is famous for this competitive drive. He built Softbank from a struggling Japanese telecom player into an industry power through a mix of aggressive pricing, savvy marketing, and customer service. Son recently installed Marcelo Claure as Sprint's CEO, another rags-to-riches billionaire who built his own business empire from nothing before selling it to Softbank. Under their combined guidance, expect Sprint to go on the offensive in short order.

So, while we'll have to wait to find out exactly what Sprint has up its sleeves in terms of its own price-cutting strategy, we've seen in the past that this kind of behavior means more savings for consumers. Take it to the bank: Change is coming to the U.S. wireless industry. And that's certainly cause for celebration for the average consumer.

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  • Report this Comment On August 17, 2014, at 11:00 PM, kennyhobo wrote:

    I once used Sprint - price. There was no value with poor reception at home, poor reception at my morning workout, and roaming on the interstates. Switched when I decided to go smartphone and use the data features, like simple GPS. Can Sprint provide service? Without value, price is irrelevant.

  • Report this Comment On August 17, 2014, at 11:13 PM, kaeyc2000 wrote:

    Verizon was unable to provide 1 minute of service on an upgraded wifi device. They felt they should be paid because they had a contract even though they were unable to provide ANY service at all. An old 3G device worked but the new 4G one would not. When they were done, they were unable to connect either one. After almost two yrs they finally admitted they used the wrong software. Customer service people were beyond stupid. Any carrier has to be better than Verizon.

  • Report this Comment On August 18, 2014, at 8:27 PM, straveler222 wrote:

    no worries here, I pay $25 a month with no contract with unlimited everything through Republic Wireless, and guess what, we are on the Sprint network, Duh

  • Report this Comment On August 18, 2014, at 8:30 PM, straveler222 wrote:

    BTW, we have great service, GPS, far less blank spots than we had on Verizon, we have had Republic wireless for two years and will never switch, Don't be a fool,

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Andrew Tonner

Andrew Tonner is a tech specialist for The Motley Fool. He is a graduate of The University of Arizona with a degree in Finance.

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