Calling All Competition
Saturday, June 23, 2007
Sprint Nextel is trying to upstage the iPhone.
A week before the much-anticipated launch of its rival's flashy music phone, the company is trying to stave off competition by promoting a new red version of its UpStage multimedia phone.
That's a tough task: Sprint has done little to impress Wall Street or consumers with its marketing campaigns of late, and the Reston company also lacks the sheen of Apple or its shiny new product. Still, such defensive moves are critical for Sprint, which has already lost subscribers to other mobile phone companies and is bracing for others who might flock to AT&T, the sole carrier for the iPhone.
Wireless companies traditionally put more advertising muscle behind the quality of their networks rather than the coolness of their phones. But the iPhone is being hailed, even before a single customer has gotten their hands on it, as an industry game-changer. It promises to marry technological prowess with simplicity in a way that has critics saying it could be the first phone that shifts the spotlight away from a cellphone's primary purpose: making calls.
"Now the intrinsic value of being mobile is in the device itself," said Mike McGuire, the vice president of research at Gartner, a market-research firm. "That's going to mean big changes in the carrier world."
In April, Sprint unveiled Samsung's UpStage phone, which works as a cellphone on one side and a music player on the other. The phone is being marketed as a less-expensive alternative to the iPhone, at $99 with a two-year contract. The iPhone will sell for $499 or $599, depending on the size of the memory.
"I would never say I don't think the iPhone won't do well, but I struggle with the idea that people are going to be willing to pay the high price," said David Owens, Sprint's director of devices.
Recent research suggests the iPhone has a large potential audience. More than two-thirds of cellphone users interested in buying an iPhone are not AT&T customers, the wireless market research firm M:Metrics said. Analysts expect about 1 million people to leave their current carrier to get their hands on one, even if it means paying about $175 to break their contract.
That's a significant threat to Sprint, which has been loosing customers steadily. According to an M:Metrics survey, 8.1 percent of Sprint's customers expressed interest in buying an iPhone. Other carriers face a similar risk: 12.5 percent of T-Mobile's customer base and 6.7 percent of Verizon Wireless's may defect, according to the survey.
Even if customers don't depart immediately, wireless companies will have to rise to the challenge by coming up with competitive new products and multimedia perks.
The iPhone will reset consumers' expectations about cellphones, said Thomas Thornton, a cognitive psychologist at Perceptive Sciences, an Austin research firm that tests mobile products.
Competitors taking cues from the iPhone are adding features like larger color touchscreens, user-friendly Web browsers and high-capacity music players to their phones. Verizon Wireless is planning to roll out updated phones with similar components. This week, Sprint released its Mogul phone, with an extra-large screen and a WiFi connection. It is planning a music phone aimed at teenagers this fall.