With the impending launch of MetroPCS (symbol: PCS), Boost, a subsidiary of SprintNextel (S) has shot a squiggly across the bow invoking that it is a better choice than MetroPCS or Leap. In an effort to find out more I sat down with James Macoun, founder of TCC to discuss how (or if) Boost’s announcement was meaningful:
WR: So shares of both Leap and MetroPCS go tumbling after SprintNextel’s BoostMobile announce their $50.00 unlimited plan, why is that?
JM: Pay as you go is a sector that is hard to understand. The tumble is a justified reaction as also-ran Sprint (did you see that their shares are tumbling in spite of the announcement) is a large company and has been barraging the airwaves with their CEO having quirky pointless monologues about wireless developments. Those that get confused run for shelter.
WR: Boost states that they have more coverage than the other two carriers…
JM: Boost is not a carrier. They are actually an MVNO working off of the archaic iDEN network that Sprint abandoned after the merger. Sprint has desperately been seeking a suitor to buy this dying network and this announcement serves two purposes: 1) Disrupt MetroPCS and Leap with their Northeast development – you see, MetroPCS is launching first quarter in New York and Boston, they already launched in Philadelphia with great success and add to that Leap’s entry to Philadelphia as well, Chicago, Baltimore-Washington later this year and you can see where Sprint is coming from. We are looking at the most populous sectors in the USA being able to buy wireless for less. 2) Try to create value for a rapidly aging network. Nobody is going to buy Sprint after their failure to conduct a merger that has resulted in so much continuing heartache with that albatross around their neck.
WR: I am still a bit confused, won’t Boost go toe to toe in these markets that MetroPCS and Leap are launching in?
JM: Not really. The key to retail continues to be distribution. Boost is sold in limited quantities at Sprint stores in the form of bait – try it yourself – you will see how they attempt to switch you over to their CDMA offerings (Sprint) in a heartbeat. There are no commissions to be earned for Sprint employees on Sprint and if anything there is animosity between the laid back surfer culture of Boost and the more structured Sprint employees.. Most of their indirect distribution (i.e. Sprint’s) is gone so my question to Boost is “Where You At?” Can’t buy what you can’t find.
Their handsets are stodgy, dated and again on a slower older generation network. MetroPCS and Leap offer much faster AWS (CDMA) handsets that allow for clearer call reception, faster Internet surfing and handsets that are more suited to 2009 tastes than 2003.
On the other hand, go to markets where for example MetroPCS serves and MetroPCS has hundreds of points of sale (physical stores) and actual MetroPCS-branded stores. Customers, believe or not, value service, easy quick answers, not a run around. Having used Boost for one of my sons I found a) Their customer service was clueless and unhelpful b) They possessed a disturbing amount of information about me when I had to give them my social security number to ascertain I was the owner of the account (something not required with MetroPCS for example). MetroPCS in 2008 won the J.D. Powers Award.
WR: Why would somebody buy Boost?
JM: Choice is a funny thing, however I would like you to think about why any retailer would invest in Boost? It has cornered itself into a niche product, MetroPCS and Leap to some extent reach a broader audience in their offerings. Sprint is being disingenuous offering a $50.00 plan through its iDEN network. After laying off thousands and with more stores closing this year (with concomitant additional layoffs), MetroPCS and Leap are creating thousands of jobs and contributing to economic growth in some of our nation’s largest cities. Furthermore, both companies are creating jobs in the impoverished areas, something Sprint (or for that matter Verizon and AT&T) have never has done nor will be able to.
WR: Okay, can you explain the network bit (MVNO?)
JM: MetroPCS and Leap are real carriers. They own and operate their networks, have invested millions in the markets they serve. There are actual engineering and sales teams dedicated to their operations. Boost is based on the old Nextel network, has little to nothing invested in the core urban areas since Nextel was a business based offering seeking high revenue. Nextel worked great in office districts and later in suburban settings as the company expanded. After the merger suburban customers switched to Verizon and AT&T when Sprint became a nightmare.
WR: So how does this affect Leap and MetroPCS?
JM: So, if you are making calls in downtown Boston for example, Boost might work, and MetroPCS will work too, yet if you go to Roxbury or Chelsea Boost is non-existent while the banners for future MetroPCS stores are flying for a reason, no? The same holds true in Philadelphia where MetroPCS sales have spiked after the disruption they were subject to by TMobile.
WR: T-Mobile? Really? Well our next article will focus on that since you seem to have tidbits about TMO that people could learn.
JM: Absolutely. Let’s get back to Metro and Leap, they know “Pay as You Go” – Boost is an also-ran. It would be an error for both of these companies to focus on Boost as the threat of impact is minimal. The true focus for MetroPCS and Leap is Sprint and T-Mobile and any smaller carrier getting in the way of their advance.
WR: Just a final question – what about nationwide coverage?
JM: While much is made about MetroPCS and Leap customers not being mobile yet increasingly more middle class customers are embracing Pay As You Go as cost control and the recent roaming agreement that gives their customers access to over 4000 cities, 300 major urban areas. So really it is not a concern.
WR: But, (and I know I said final question), what if I am sitting in a bus on the way to Hartford CT, will I get coverage on i-84? MetroPCS and Leap have roaming agreements with other carriers that actually allow access to other networks, it is great for emergency calls. With Nextel/Boost/Sprint there is NO Roaming available, the handset does not work except for the required 911.
