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Sprint Makes a Statement with Pricing and Launches Samsung Instinct at $129| Jun 20, 2008 | U.S. Wireless Services | Competitive Update Current Perspective: Positive Event SummaryJune 20, 2008 -- Sprint announced that the Samsung Instinct is available for just $129.99 with a two-year contract after a $100 mail-in rebate. The Instinct is a new wireless device that offers consumers an industry-leading user experience by combining full touch-screen functionality with the fast speeds available on the largest national mobile broadband network. Analytical Summary• Current Perspective: Positive on the Samsung Instinct at Sprint, because at $129 (with contract after a $100 mail-in rebate) and backed with a $100 million advertising campaign, it should help Sprint reduce churn and may even bring Sprint back into consideration for consumers who had largely written the carrier off. Early Instinct prototypes were not terribly impressive (i.e., two simply refused to work at the CTIA launch), but the production version is almost a different product. The Instinct is a well-designed touchscreen feature phone with attention to detail throughout: from the accessories in the box to the user interface to the attractive cosmetics. Combined with Sprint’s Everything plans, the Instinct serves as a voice, GPS, and entertainment device. However, it is not an iPhone – it is not even a smartphone – and Sprint invites ridicule by creating a Web site and video ads claiming the Instinct “defeats” Apple’s iconic product. • Vendor Importance: High to Samsung, which has some strong entry-level smartphones in the U.S. market, but wants to be seen as a leader in touchscreen devices as well. The Instinct is even more important for Sprint; the carrier has seen subscriber losses after its acquisition of Nextel went bad and it is under pressure from Verizon Wireless, which is hitting on all cylinders with its “best network” messaging, and AT&T, which is using the iPhone to pull subscribers from rivals. Sprint hopes to use the Instinct as an object lesson for its Simply Everything plans and give consumers a reason to put Sprint back into consideration when they think about wireless carriers. • Market Impact: Moderate on the consumer handsets market, because the Instinct is a consumer handset, and this class of device is increasingly moving towards smartphones. Sprint’s heavy subsidies on the Instinct are a reaction to the iPhone and its competitors, not a generator of the trend. Still, the Instinct’s pricing plans, all of which include unlimited data, messaging, e-mail, navigation, television, and streaming music, are a differentiator, especially relative to T-Mobile, which does not have any similar devices or services to offer. Recommended Competitor Actions• Apple should publicly ignore the Instinct, though pushing the iPhone 3G’s price down further would make it even more of a potential upgrade for consumers who have not been smartphone buyers in the past. Still, there is no reason to give competitors so much ammunition: why doesn’t the iPhone support MMS, A2DP, voice command, or cut and paste? • LG should ignore the Instinct, too, but for a different reason. Rather than pouring further resources into sophisticated feature phones that will always be a step behind smartphones, LG needs to jump into smartphones head first. It is now far too late for LG to claim leadership in this market segment, but, with the tremendous growth in the category, LG cannot stay on the sidelines any longer. • Palm already has a $99 touchscreen smartphone (the Centro, at three carriers), and it is already working on a next-generation platform to compete with the iPhone, Android phones, and more. However, since the $129 Instinct has the potential to steal sales from the Centro, Palm should position the Centro as a messaging device. While the Centro’s shrunken QWERTY keyboard is awful, many will find it better than the virtual QWERTY keyboard on the Instinct. • Nokia appears to be betting that it can reignite sales in the U.S. by creating bland entry-level phones customized for U.S. carriers (a change from its history of bland entry-level phones that were not customized for the carrier). The Instinct is not a direct threat to Nokia at Sprint, because Nokia does not sell phones at Sprint. However, Nokia cannot compete with this class of phone at any U.S. carrier. It remains to be seen if Nokia’s upcoming touchscreen devices will be on U.S. carrier shelves; Nokia’s current hot products are not. • Motorola is not even playing in the same game as the rest of the industry and it needs a dramatic overhaul. It has no touchscreen phones outside of the aging Ming in Asia, its multimedia smartphones have poor specifications (and are not available altogether in the U.S.), and its handset lineup is overpriced. • Sadly, Kyocera Sanyo is not playing this game either, and it is going to lose Sanyo’s favored spot at Sprint if all it makes are entry-level voice phones that do not drive data revenues for the carrier (and do not generate strong margins for the vendor, either). Recommended End User / Customer Actions• Consumers looking for a small, inexpensive musicphone should strongly consider the Nokia 5310 XpressMusic at T-Mobile. It offers a solid music experience with none of the usability issues of the Samsung Upstage at Sprint or the Samsung Juke at Verizon Wireless. • Other good musicphone options are the Sony Ericsson W580i at AT&T, and LG’s Chocolate II at Verizon Wireless. Both of those choices will require purchasing additional storage before they do anything useful music-wise. • Consumers looking for a premium musicphone experience should look at the iPhone at AT&T, and that’s it. There are competitors on the market (such as LG’s Voyager at Verizon Wireless), but none synchronize with iTunes, include as much storage, or offer the iPhone’s user interface. CLIENTS ONLY Current PerspectiveCompetitive Positives and ConcernsRecommended Vendor Actions
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Analyst: Avi Greengart
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