News

Sprint and other wireless firms answer iPhone's call

Jason Gertzen and David Hayes
McClatchy Newspapers (MCT)

KANSAS CITY, Mo. - Sprint is trying to take a bite out of Apple.

As the mobile-phone industry gears up for Apple Inc.'s soon-to-be-released mash-up of an iPod and a cell phone, Sprint Nextel Corp. on Monday said it will change its music pricing to match the market leader.

Starting next week, Sprint will slash its $2.50-per-song price to 99 cents. That is the same price that has allowed Apple to sell more than 2 billion songs through its online iTunes Store.

Sprint also has a new phone called the UpStage, which executives tout as a device that is well suited to playing music and placing calls.

The moves by Sprint, which is based in Overland Park, Kan., are the latest to show how much wireless companies are counting on services beyond calls to stand out from competitors and entice consumers to spend more. Sprint's rollout came as its leading competitors also made moves to buttress their music-selling strategies.

Sprint said Monday that subscribers have downloaded an industry-leading 15 million songs over its wireless networks.

While that is not even a nibble out of Apple's market share, Sprint and its competitors are looking to June, when Apple and Cingular Wireless plan to launch the iPhone. The phone will sport a high-end price tag - either $500 or $600, depending on song capacity - but Apple Chief Executive Steve Jobs contends that his company will sell 10 million iPhones by the end of 2008.

David Owens, the Sprint executive who unveiled the $149 UpStage on Monday, said he sees Jobs' goal as nothing but good news.

"I congratulate Steve Jobs on his intention to sell 10 million," Owens said at a wireless industry trade show in Orlando, Fla. "If that's the case, I can't imagine how many of these we're going to sell. If he sells 10 million, that's great news for us."

The UpStage, manufactured by Samsung, will offer consumers a product that is distinctly different from the iPhone.

Sprint calls the UpStage a flip phone with a twist. One side of the device has a keyboard and a small screen for text messaging and to identify incoming calls. Hit a button, flip the phone over and the device becomes a full-featured digital music player.

"At $149 and downloads for 99 cents, we built it for the masses," Owens said.

An Apple spokeswoman said the company had no comment on Sprint's announcements, though Cingular, Apple's partner, made news of its own as tunes grabbed the spotlight at the trade show.

AT&T cranked up the volume Monday by cutting a deal that allows Cingular customers to access the Napster To Go service free for a year.

Today, Randall Stephenson, AT&T's chief operating officer, is expected to offer an update about the iPhone in his keynote address to the trade show.

All this attention is for a phone that has yet to appear in a retail store.

"Everybody is so focused on the iPhone," said Jeff Kagan, an industry analyst who was at the trade show.

Kagan said companies such as Sprint are poised to prosper as consumers become increasingly intrigued by the buzz that will accompany the iPhone's launch.

Even if Apple sells 10 million iPhones in the first 18 months, it still would be only a small slice of the nearly 230 million mobile phones in the United States, he said.

"Music is going to be playing a big role," Kagan said. "It is what everybody is talking about. This is an opportunity for the whole industry to jump on music on phones."

Music sales also are popular with customers of Verizon Wireless. Since last fall, the company has sold more than 1 million songs a month.

"When a customer tries out and loves a service we offer them that is not voice, they are more inclined to stay with us," said Jeffrey Nelson, a Verizon executive.

Verizon sells a song for 99 cents when it is downloaded to a computer, or $1.99 to send one version directly to a phone and another to a computer account.

Apple clearly is worthy of respect after achieving iconic status with its music players, Nelson said. The wireless industry, however, is not shrinking from the challenge posed by the new rival.

"We'll see when the device comes out how good a phone call it makes and if customers are willing to spend the amount the device is going to cost," Nelson said.

Sprint's announcement of 99-cent songs was not a surprise, considering the influence of iTunes on the music industry, said Charles Golvin, an analyst with Forrester Research Inc.

"Their price was too high," Golvin said of Sprint. "Apple has set the pricing that everybody expects."

Mixing music with cell phones poses challenges for wireless carriers, Golvin said. Call quality and price are the major factors when consumers pick a carrier.

Music can be important for the wireless companies as they strive to attract new customers and encourage subscribers to use add-on services made possible by billions of dollars spent on new technology.

"Apple doesn't make very much money on the iTunes music store," Golvin said. "It is much more about selling iPods than the profitability of the music service itself. The same thing will be true for Sprint. It's more about getting people to use their phones for other things."

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