June 16, 2012, 7:35 AM — How many pre-paid buyers will pony up $650 for a new 16GB iPhone 4S to be able to get no-contract service starting at $30 a month?
Some analysts believe there won't be very many customers who will take advantage of such a plan, as announced this week by Virgin Mobile USA and luanching June 29. That's especially the case, the analysts said, with Android phones costing less than one-third of the iPhone on a typical pre-paid plan.
"I can't see too many Virgin customers calling up and saying I won't sign up for your service unless I can get an iPhone, especially since credible Android devices are one-half to one-fourth the cost," said Jack Gold, an analyst at J. Gold Associates.
"The costs of these [iPhones] is so high and we've seen little success in a non-subsidized model," like the one Virgin is offering, said Gartner analyst Phillip Redman. "I have many doubts this [Virgin] plan will work also, but Apple has surprised us before... Maybe there's enough pent-up demand at these small carriers, but the sales numbers won't be big."
Sprint, which owns Virgin, sees things differently, of course. Sprint and Leap Wireless, which buys Sprint network CDMA 3G service, are exploring ways to expand the popularity of the iPhone beyond the traditional base of post-paid subscribers.
Post-paid customers get the same iPhone subsidized by the Sprint, AT&T and Verizon Wireless for $199-- less than one-third the Virgin cost-- but must sign a two-year contract for monthly service is more than double the discounted $30 monthly price Virgin is offering for 300 minutes of voice and unlimited texting and data.
"The Virgin Mobile brand is extremely well-positioned to carry this iconic device and accelerate its growth as an alternative for previous post-paid subscribers," Jayne Wallace, director of communications for Sprint, said by email. "There's no question that the iPhone on both our pre-paid and post-paid platforms is a win-win for the business all around."
She explained that post-paid contracts are slowing down across the industry. "The growth area in the market continues to be the no-contract space," she added, explaining that was why Sprint acquired Virgin in 2009 and created its multi-brand Sprint Prepaid Group in 2010.