Sprint CEO hints at plan to turn old iPhones into new customers

Marcelo Claure talks up the carrier's new iPhone Forever program and points to upcoming network test results that put Sprint on top in at least one major market.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
5 min read

Sprint still has a few more tricks up its sleeve as it works to regain its footing and take on competitors in the US wireless market, says CEO Marcelo Claure.

Sprint CEO Marcelo Claure hinted at upcoming announcements that will help accelerate Sprint's turnaround. Marguerite Reardon/CNET

On Monday the company announced a new iPhone Forever program that allows customers to lease a 16-gigabyte Apple iPhone 6 for $22 a month and upgrade to a new one anytime they like. The move is the latest in a long line of promotions and initiatives to bring customers back to Sprint's network.

Sprint has lost customers over several quarters due to poor network performance and intense competition from other major carriers. The company lost its ranking as the No. 3 national carrier to T-Mobile last quarter. In spite of recent financial gains, T-Mobile has outpaced Sprint's customer growth in recent quarters.

Sprint's new iPhone plan comes amid intense competition in the wireless industry and a shift away from phone subsidies and service contracts -- a trend started by T-Mobile two years ago. Earlier this month, Verizon dramatically overhauled its plan options, requiring customers to pay for their smartphone in monthly installments or buy it outright. AT&T has also asked its retail partners like Apple and Best Buy to only offer service plans with monthly installment plans for devices.

Claure said in an interview today that Sprint's turnaround is in full swing. He highlighted some upcoming announcements in the next few weeks that will show where Sprint is headed and how much progress it's already made.

What's old is new again

One of the announcements Claure hinted at will explain what Sprint plans to do with all those second-hand iPhones it expects customers to trade in as part of its new iPhone for Life program. He said these phones will be used to help Sprint win new customers by addressing a different segment of consumers.

"Used phones and, the iPhone in particular, have tremendous appeal," Claure said. "We have a surprise in terms of what will happen to these used phones."

Claure said the thinking behind the iPhone Forever program is simple. He wants to give high-end customers exactly what they want, which is cutting-edge technology. And at the same time, he believes the company can serve customers who may not have the means or desire to pay for the latest and greatest handsets.

"I don't know any other product besides the iPhone where people wait outside the store overnight," he said. "And it happens every year. Customers are dying to get their hands on the technology as it comes out. We are solving that pain point."

At the same time he said the program sets up a pipeline of used devices that will allow Sprint to serve "a different customer."

If anyone is able to tap this market of second-hand and refurbished phones and make a profit, it's Claure. In his previous role as founder and head of Brightstar, he created a business that manages device supply chains for some of the biggest wireless companies in the world, including Vodafone, Telefonica and Verizon Wireless. Brightstar also provides and manages device insurance programs for carriers, which rely heavily on refurbished phones that can be used as replacements.

Claure said he plans to incorporate some of these ideas into Sprint to help the company return to profitability.

"I am one of creators of that market," he said. "And we're using some of that knowledge at Sprint."

What about the network?

Of course, device promotions and pricing will only get Sprint so far. Claure has admitted that Sprint's network must be improved in order for the company to truly compete. He talked extensively on the company's earnings call in August of the changes Sprint has made to its network to ensure it is as good as and in some instances better than its competitors' networks. But Sprint is still playing catch-up, especially when it comes to 4G LTE service, which enables customers to connect to the Internet on their smartphones at broadband speeds.

Still, Claure said the company is making headway on network improvements. He said that in 80 markets where the company has launched "carrier aggregation," a network design technique that allows wireless operators to combine wireless spectrum to essentially widen the road on which its customers' Internet traffic travels, Sprint has doubled network speeds.

Over the past year, independent testing company Root Metrics has verified some of these improvements, noting that Sprint has made significant headway in some markets, elevating its network performance.

Claure said that new results from a Root Metrics test to be released August 25 show that in one market where the company has concentrated its efforts, Sprint beats all its competitors both in terms of network speed and reliability. He wouldn't name the city, but Sprint has previously talked about Chicago as a showcase market for its most advanced and cutting-edge network technology, including a plan that "densifies" or puts more cellular radios in close proximity to each other, creating smaller cell sites, which improve network capacity and coverage.

"This is exciting because it shows that densifying the network the way we want to do it, works," he said. "And we are faster and more reliable than the other three carriers."

A representative from Root Metrics declined to comment on Claure's statement since the report hasn't been finalized.

Claure said Sprint plans to extend this "carrier aggregation" technology and network architecture to 100 other markets within the next 24 months.

Sprint won't be No. 4 for long

Claure admits that Sprint's turnaround is taking time. But he is not disheartened that rival T-Mobile has overtaken Sprint as the third largest carrier in the US. Instead, he said that T-Mobile deserves credit for the work it's done in improving its business, but he suggested that T-Mobile's surge to overtake Sprint is merely about timing.

"They are a few years ahead of us in this transformation," he said. "They were supposed to overtake us the quarter I took over. They've had incredible momentum. For now, we are focused on returning to profitability and winning customers back."

Correction, August 18 at 1:36 p.m. PT:An earlier version of this story incorrectly described Sprint's plans regarding two-year contracts. The company has no plans to do away with those contracts.