Sprint Plans to Join Rivals in Dropping Mobile Contracts

Sprint's CEO says the company will no longer offer two-year contracts for new mobile accounts by the end of 2015 as it ends smartphone subsidies.  

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Sprint is the latest of the four major U.S. mobile carriers to announce that it is ditching two-year smartphone contracts and subsidized, discounted handsets as a way to retain customers. Instead, the company now vows to stop offering contracts by the end of 2015 and move entirely to leasing plans that will allow customers to switch phones more often.

The company's new strategy, which Sprint CEO Marcelo Claure unveiled in an Aug. 17 interview with The Wall Street Journal, follows a similar move Verizon made earlier in August, when that company announced it was giving up on the contract wars. T-Mobile had given up on contracts as one of its "Un-carrier" moves more than two years ago.

Sprint began offering a lease option last year and Claure said the carrier will move entirely to that model by the end of the year, The Journal reported.

Under the leasing plans, customers pay the full price for their phones, usually in a monthly payment plan that charges no interest, or they can pay for the phone in full at the time of purchase. About 51 percent of Sprint's customers who purchased a new phone last quarter used the leasing option, the article reported.

In a related move, Sprint announced a new iPhone Forever lease for $22 a month for a 16GB iPhone 6 with an option to upgrade to the newest iPhone at any time, according to the company. Customers under the plan can bring their working iPhone in any time to upgrade on the spot to the latest model on any eligible Sprint rate plan.

In addition, customers who switch to Sprint from any other carrier and existing Sprint customers who are upgrade-eligible can turn in any smartphone to get a reduced promotional rate of $15 per month on a new iPhone if they complete the upgrade before Dec. 31. Their next upgrade after Dec. 31 would then be at the normal $22 a month rate.

For customers who want to switch from another carrier, Sprint will pay for switching charges to move them over, the company said.

"We asked ourselves, 'What could we do that would move our customers forward with the latest and greatest technology every day?'" Claure said in a statement. "We decided: How awesome would it be if any time customers don't have the latest iPhone, they are eligible to upgrade, and have it be as simple as handing us your existing iPhone and picking up a new one—all included in your monthly rate."

When it unveiled its own contract-free mobile plans earlier in August, Verizon said its plans will start at $20 per smartphone per month, in addition to a choice of four data packages ranging from $30 a month for 1GB of shareable data to $80 a month for 12GB of shareable data. A 3GB shareable data package is $45 a month, while a 6GB package is $60 a month.

Unlimited talk and text are included with all of the packages and extra data can be purchased at $15 per GB. Monthly access charges for a tablet or Verizon Jetpack hotspot will be $10 per month. Phone purchase prices are in addition to the calling plan charges. Verizon will, at least for now, still offer two-year contracts for tablets and for existing customers who are on More Everything plans and want to keep them, a Verizon spokesman told eWEEK.