Sprint reportedly is considering buying FreedomPop, a Sprint mobile virtual network operator with a disruptive pricing approach that necessarily requires a low-cost marketing effort. The possible acquisition, in itself, is not the story. Larger mobile firms have acquired smaller firms with some regularity over the past couple of decades.
The bigger significance comes because of FreedomPop’s sales model, something that Sprint might be able to leverage on a wider scale, to bolster its prepaid efforts. Whether the model also might have impact on some postpaid marketing also is an issue.
As Sprint shifts its market offers to a “value” approach, Sprint is working to lower its costs of operating its business and marketing its services. If gross revenue is going to drop, then operating and marketing costs also need to drop.
Selling online is one way to do that.
FreedomPop has used a freemium approach, offering no cost basic service and additional plans for a fee. FreedomPop’s free phone plan includes use of 200 voice minutes a month, 500 text messages and 500 MBs of data.
FreedomPop offers mobile service plans that begin at $5 a month, and began operations selling Internet access using the same freemium approach. The firm’s free Internet access option offers 1 Gb of access, with for-fee plans, while consumers who want more data can buy plans starting at about $10 per month. Speeds for the free service use the Sprint 3G network, while the for-fee plans add access to the faster Long Term Evolution network.
The startup, which began life as a provider of Internet access, acquires 95 percent of its subscribers online, with customer acquisition cost of $4 per new add.
That would be attractive for at least some portion of Sprint’s business, starting with prepaid accounts.
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