Sprint and Palm Pre – Is it a game changer?

Here is Sprint’s customer story that I took right  from their Q1 2009 Report -

For the quarter, total wireless customers declined by approximately 182,000, including net losses of 1.25 million post-paid customers – comprising 531,000 CDMA and 719,000 iDEN( read NexTel) customers (including a net 94,000 customers who transferred from the iDEN network to the CDMA network). The company also lost 90,000 prepaid CDMA customers. The company gained a net 764,000 prepaid iDEN customers and 394,000 wholesale and affiliate subscribers. The company achieved total subscriber growth on the iDEN network.

Sprint’s Direct Postpaid subscriber churn is 2.25% and prepaid subscriber churn is 6.86%. These numbers are better than their churn rate in 2008.

Over last several years, wireless industry has matured. Network reliability and call quality are no longer differentiating factor for the consumer. Now the future of the wireless growth is dependent on the ability to offer innovative products and services which can attract customers from other service providers along with the ability to maintain the existing customer base by reducing the churn and superior customer service. So the innovative products and services along with superior customer service is going to be the key for growth.

We have seen the success of AT&T and iPhone. Verizon has also seen significant subscriber growth by having exclusive agreement with Blackberry Storm. We now know that devices have the potential to take precedence over the operator. Devices can very well be latest arsenal in the war over customer specially when the net wireless subscriber growth is almost flat.

I see Sprint and Palm Pre exclusivity in this perspective – it is an attempt to get more and more customers excited about Palm Pre and entice them to move to Sprint. However, I do not believe that this will have any significant top line impact on Sprint subscriber growth. It is simply too little too late.

Let us start with Palm first. I’ve seen some rave review about Palm Pre and had a chance to look at it in the store as well. However, this is not a game changer like Blackberry or iPhone – this is not first in any category. It has nice and cool features may be better than iPhone but I don’t think that it can create a fan following of its own – apart from almost extinct Palm fans. I’ve not seen anything that will make me cringe to switch. However, it is a good device. It will definitely sell like any other devices but I do not see it to get to an iconic status of iPhone or Blackberry.  Palm will also get hurt by the aggressive marketing from Apple. Apple just reduced the base price for iPhone to $99 and it has already grabbed the lime light away from Palm Pre.

For Sprint, Palm Pre is not what iPhone was to AT&T. Also Sprint has their exclusive agreement with Palm only through year-end. Both AT&T and Verizon said that they will start offering Pre once exclusivity with Sprint expires. This is good for Palm but I’m not sure why an AT&T or Verizon subscriber will move to Sprint knowing very well that they could get the same device in next 6-8 months.

Palm Pre is not a game changer for Sprint and I do expect the challenges to continue for Sprint. Sprint 4G WiMax has the potential to change the game if Sprint can execute. We will continue to watch next couple of quarters and see if there is any meaningful impact of this exclusivity for Sprint.

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