Boost Mobile overhauls prepaid plans to stay in competitive mix

Boost Mobile radically shook up its phone service plans on Monday as it looks to keep pace with amped-up rivals.

The provider of prepaid wireless service, which is a unit of Sprint, rolled out three new plans: a $40 plan that includes 500 megabytes of data; a $50 plan with 2.5GB of data; and a $60 plan with 5GB of data. As has become the industry standard, all of the plans come with unlimited calls and text messages.

The three options replace its older offer of a $50 basic phone plan and $55 smartphone plan. It also got rid of what was its hallmark feature, Shrinking Payments, which knocked as much as $15 off the monthly bill for loyal customers.

"We felt it was time," Dow Draper, president of Sprint's prepaid business, said in an interview with CNET. "We're tailoring the plans to fit with what people needed."

The change comes at a time when the prepaid business -- long seen as an outlet for growth at time when the traditional contract business slows -- is starting to see some serious competition. MetroPCS has come back to life under T-Mobile's management, adding nearly half a million net new customers, while AT&T has promised to aggressively enter the market through its acquisition of Leap Wireless.

On the surface, it appears as if Sprint is slipping just as T-Mobile and MetroPCS are enjoying a resurgence. Last week, T-Mobile reported 465,000 net new prepaid customers in the first quarter, while Sprint lost a net 364,000 prepaid customers in the same period.

But Draper was more upbeat. He attributed the losses to the re-certification process of its Assurance business, which provides free wireless service to low-income families and individuals. Those declines, which will persist into the second quarter, don't reflect the strength of its Boost Mobile and Virgin Mobile prepaid arms, which generate much more revenue than Assurance.

"Boost and Virgin by themselves are just a different story," he said.

Boost's new plans are more in line with what's offered by MetroPCS and Leap Wireless (which markets its service under the Cricket Wireless brand). MetroPCS's $60 plan is unlimited, and Leap lacks the lower data $40 plan.

On the elimination of "Shrinking Payments," Draper said he wanted to simplify the pricing structure and ensure the savings were apparent upfront. Shrinking Payments removed $5 a month after six months of on-time payments for a maximum savings of $15.

"Let's make sure we are as competitive or more competitive right out of the gate," Draper said.

Another issue has been Sprint's network. Boost advertises 3G and 4G speeds because Sprint's hasn't yet completed the deployment of its faster 4G network, and in some areas, its slower 3G network still awaits an upgrade of its own. Contrast that with MetroPCS, which enjoys a nationwide LTE network from T-Mobile, as well as a wider HSPA+ network, which T-Mobile calls 4G.

Leap's Cricket will be able to use AT&T's much larger LTE network.

Sprint, however, has made progress in its network upgrade, now covering 443 cities and 225 million people.

"The finish line is in sight, in our marathon to completely rip and replace our network from the ground up," said Sprint network chief John Saw during an investor conference call last week.

After a customer hits the maximum allotment, the data connection is throttled, or intentionally reduced to the much slower 2G speeds until the month is over.

Draper said an unlimited plan wasn't in the cards for Boost, noting that the unlimited offering is a signature feature of Sprint's core service.

He did tout other features such as Boost Mobile Wallet and its international calling packs, and believes Boost has been "a major thorn in everyone's side."

Draper hinted at more things to come.

"I have a lot of changes planned over the next three quarters," he said. "I'm very pleased with how Boost has performed and what we have in the pipeline."