The offer could be seen as either retaliation, or at at least a defensive move, by Sprint CEO Marcelo Claure against T-Mobile's John Legere. Legere has made catching his rival and becoming the No. 3 wireless carrier -- behind AT&T (NYSE:T) and Verizon (NYSE:VZ) -- a stated goal for 2015.
Sprint has been more competitive under Claure, and this new offer join his company's "cut your bill in half" deal for people moving from AT&T and Verizon. It's hard to imagine it will work, but at least Claure is making an effort to reverse his company's sinking fortunes.
What's the deal?
The biggest challenge in deciding what wireless company to switch to (or pick in the first place) is that every company, aside from T-Mobile, engages in hyperbolic advertising. It's a boat full of "best networks," "greatest deals," and "least expensive plans" adrift in an ocean of half-truths and creative interpretations.
Legere has made an effort to simplify T-Mobile's plans by eliminating these long-held tricks of the trade. Claure has not. That's why you should approach the half-off deal -- which, as I wrote about it in detail here, isn't really half off your bill -- and any Sprint offer as you would ones from AT&T and Verizon, which is to say with at least a measure of skepticism.
In this case, Sprint has specifically offered to "guarantee all T-Mobile customers a minimum of $200 instant trade-in value when they take their wireless number to a participating Sprint store and trade in their current working T-Mobile smartphone." In the same press release, the company also offered T-Mobile customers "up to $350 per line via a prepaid or reward card to cover their installment billing balance on their current device or early termination fees after online registration."
That sounds like a nice deal, but it's not quite as good as it sounds.
What the deal really means
First, offering to pay early termination fees for T-Mobile customers is a meaningless gesture, because T-Mobile doesn't have contracts. That money, however, could go toward paying off a device, which would be a benefit if a customer owed money on a phone purchased on an installment plan.
This makes the Sprint offer a decent deal only for customers in the beginning of an installment deal with T-Mobile who want to switch. In this case, the customer could get out of an agreement on an expensive phone -- such as an Apple (NASDAQ:AAPL) iPhone 6, which costs $27.06 a month on the T-Mobile 24-month installment plan.
For this select buyer, this could be a decent deal, but there are a number of caveats. First, the Sprint deal requires buying, financing, or leasing a phone. That means that any savings from getting out of a deal on a high-end phone matters only if you replace it with a cheaper one. And while Sprint touts its plans as costing less than T-Mobile's, the example in the press release is a very specific one involving a leased iPhone 6.
In that deal, you pay $27 less a month for the same data, talk, and text than you would on T-Mobile, but at the end, you don't own a phone. Replace the lease offer with a purchased or financed phone, and the cost of data, talk, and text rise to equal or more than T-Mobile's.
It should also be noted that there are other ways to get out of an installment deal, including selling your phone on eBay, where the going rate is between $400 and $600 for a 16GB iPhone 6, depending on condition. In addition, Gazelle, which buys used phones, pays $315 for a 16GB T-Mobile iPhone 6 in decent condition. Sprint's guaranteed minimum really means little unless someone with a really old phone is just dying to get to Sprint.
In that case, $200 might be a good offer, assuming the person then buys a cheap phone from Sprint.
This won't matter, and it may hurt
This latest Sprint offer may spur a lot more Tweets from Legere, but it's unlikely to win the company more than a trickle of customers. More importantly, it wastes energy and ad dollars that could be directed at taking customers from AT&T and Verizon.
Sprint and T-Mobile are both lower-cost alternatives to the big boys. Legere has equal bile for all of his competitors, but his company's real efforts go after the industry leaders. Sure, he likes tweaking Sprint, but he really just sees Claure's company as something to pass, not a real rival.
Claure is wasting time and effort. There are two bloated, overpriced competitors packed with customers who might be lured by a better price, and those are better targets than T-Mobile.
Instead of going after Legere, Claure needs to follow his lead. Drop overages, simplify pricing, and make a commitment to honest dealing. Wireless customers don't need more hollow promises. They need actual values.
Daniel Kline owns shares of Apple. He has been a Sprint customer since 1998 and has only regretted it about half the time. The Motley Fool recommends Apple, eBay, and Verizon Communications and owns shares of Apple and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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