With dismal earnings in the fourth quarter, Sprint offers flat-rate pricing to compete in the unlimited wars

In light of Sprint Nextel’s disappointing earnings in the fourth-quarter, the third-largest wireless carrier today announced it is following in its competitors’ footsteps by offering customers an $99 unlimited calling plan. Last week’s fury of flat-race pricing schemes, which saw Verizon lead the way with a $99 all-you-can-eat plan, to be followed within hours by AT&T and T-Mobile, had most saying it was only a matter of time before Sprint got on board.

In fact, prior to last Tuesday’s showdown, most were anticipating Sprint would start the bidding wars, rather than trail its competitors, said Matthew Kunkle, wireless services pricing analyst for Current Analysis. Sprint conducted trial runs of the an all-you-can-talk plan in a few test markets for $120, but never went nationwide. This left the door wide open for Verizon to kick off the all-out race. Although not going as low as many analysts expected, Sprint’s plan – announced over a week later— includes what CEO Dan Hesse called “simply everything” – unlimited voice, Web surfing, email, text messaging, push-to-talk services and even GPS navigation – a feature not included in its test markets.

The new plan was announced today in Sprint’s fourth-quarter earnings, where Hesse also reported a loss of $29.5 billion, down from last year’s Q4 profit of $261 million. Hesse attributed the poor financial results to a challenged wireless business, which saw revenue fall 6% year-over-year to $8.5 billion. It’s wireline revenue also slipped 1% from last year to $1.6 billion.

Hesse said that the company is “making significant changes across the organization in an effort to improve execution, stabilize our customer base and deliver on the opportunity provided by our assets.” As such, it is no coincidence that the announcement of Sprint’s competitive flat-rate offering came concurrently with the earnings call. Kunkle said that Sprint had to make the announcement today to serve as a bright light in its otherwise dark wireless outlook.

“First of all, from a PR standpoint, they can’t keep offering $200 for unlimited minutes, when everyone else is offering $100,” he said. “If anything, they had to – when they are saying all this bad news, they had to say something good. It was the perfect time for them to do it.”

Sprint’s move, while it likely won’t make a dent on AT&T or Verizon’s wireless business, was done largely to undercut T-Mobile, Kunkle said. “T-Mobile wants to be known as the value leader,” he said. “If they see another big national carrier go under them, they might respond.” But don’t expect a repeat of last Tuesday’s blow-for-blow battle, he added. Most likely, T-Mobile, along AT&T and Verizon, will wait it out a few quarters to gauge the progress of Sprint first.

That being said, with the four largest U.S. carriers on board, the pricing wars may still be far from over. Attention is now turning to Alltel, the country’s fifth-largest wireless operator, that prides itself on being customer friendly and affordable. Kunkle said that it was a smart move for Sprint to wait it out to see what everyone else did, and now Alltel is presumably doing the same. Unlike Sprint, however, it might not feel the same pressure its larger competitors did due to the limited number of customers the plans actually affect -- roughly 10 to 15%, according to telecom analyst Jeff Kagan.

“It is great for consumers, but at $100, there are just not a lot of people who are going to jump on it,” Kunkle said. “That is why I think Alltel and T-Mobile are still set up really well with their unlimited calling featured plans like My Fave and My Circle. It is still a lot to pay and I don’t know if they really want to go that high. I don’t think it is going to change much right now. Everyone is going to wait for a couple of quarters and see how this does for Sprint. Maybe in a couple quarters we’ll see something change, but I don’t think we’re going to see anything happen right now.”