NEW YORK Boost Mobile, a unit of Sprint Nextel (S.N), is unveiling a $50-per-month cell-phone plan providing unlimited calling and texting, pitting it directly against regional rivals Leap Wireless International Inc LEAP.O and MetroPCS Communications Inc PCS.N.
The offering, available January 22, was designed to attract budget-conscious consumers in the weak economy.
"We anticipate a fairly rapid adoption of this, both from new customers and from existing customers ... Predictability is a very appealing thing in tough economic times," said Boost Vice President of Marketing Neil Lindsay.
But he declined to give specific growth estimates.
Boost. whose parent company Sprint has been bleeding customers, is looking to upgrade existing customers, who spent an average of $31 a month in the third quarter, and to steal customers from Leap and MetroPCS.
It is targeting consumers who use their phones mostly for voice calls and texting rather than surfing the Web because its iDen network has slow mobile Web speeds.
However, the service may also win some customers from Deutsche Telekom's (DTEGn.DE) T-Mobile USA, which is often seen as a value provider, and from the top two U.S. wireless services, Verizon Wireless and AT&T Inc (T.N), which both offer unlimited voice services for $99 a month.
"It sets a bar for the wireless industry and in some sense a floor," Current Analysis analyst Bill Ho said of the Boost offer. "The pricepoint will hit everybody -- the postpaid people, the prepaid people and the wireline people."
Prepaid customers pay for calls in advance while postpaid customers commit to contracts of up to two years and pay bills at the end of every month.
But Ho said Boost, which uses Sprint's network based on iDen technology, is not as well-known as bigger rivals and could find it difficult to convince consumers to pay fines to ditch existing two-year mobile contracts in favor of Boost.
Boost's offer is $5 more than the $45 offer that MetroPCS says is its most popular plan. But Boost's Lindsay argues that his service is cheaper than those of MetroPCS and Leap after some taxes and other charges are taken into account.
The executive also said Boost's network, which currently covers a potential customer base of 274 million people, has wider coverage than Leap and MetroPCS.
Leap and MetroPCS plan to have coverage for about 200 million people between them by 2010 under their recent roaming agreement, according to MetroPCS. Today, Leap has coverage for about 64 million people and MetroPCS covers about 60 million.
Current Analysis's Ho said consumers who like to use their phones to surf the Web, including Sprint customers who sign contracts for $99 monthly bills for unlimited voice and data, would not be tempted to move to Boost.
But he said it may prove hard for bigger carriers to keep consumers who are on a budget and simply want to talk and text a lot.
"The bigger guys really can't match that ($50) number. Nobody wants to get into a price war," Ho said.
(Reporting by Sinead Carew; Editing by Gary Hill)