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Sprint promises savings from new early upgrade plan

People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly
People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly

NEW YORK (Reuters) - Sprint Corp on Friday joined its three biggest rivals in offering an early upgrade option for smartphones and promised cheaper fees than its competitors charge, in the latest sign of intensifying competition in the U.S. wireless market.

Shares in Sprint, the No. 3 U.S. mobile provider, fell almost 3 percent because of concerns about its financial outlook, which could be hurt by the service discount, analysts said.

Sprint will allow customers who pay for their phones in installments to upgrade their devices every 12 months, instead of the two years allowed under existing plans.

The company said customers participating in the new plan, called One Up, will pay $15 per month less than its standard service fee for unlimited talk, texts and data.

It said customers choosing the upgrade option will pay up to $45 a month less in service fees than they would for comparable offerings from AT&T Inc and Verizon Wireless.

Macquarie analyst Kevin Smithen reduced his estimate for Sprint's earnings before interest, taxes, depreciation and amortization (EBITDA) even before the new offering was announced, saying that previous expectations were "unrealistic."

In a research report Smithen said he cut his EBITDA estimate to $5 billion from $5.24 billion for 2013 and to $6 billion from $7.3 billion for 2014.

T-Mobile US, the No. 4 U.S. mobile provider, offered an upgrade plan earlier this year and Verizon Wireless and AT&T followed suit in the summer. AT&T and Verizon have been criticized for charging their customers too much.

All these installment plans are aimed at reducing carrier costs as well as satisfying consumers who do not want to wait two years to upgrade.

Under Sprint's offering, customers buying the latest Apple Inc device, the iPhone 5S, would pay a monthly fee of $27 for the device on top of a monthly service fee of $65, plus taxes and a one-time fee of $36 for device activation.

While comparison of Sprint's service plans to those of its competitors is impossible because of differences such as data allowances and the number of devices supported, Sprint said its $65 monthly service fee most closely compares to $110 per month plans at AT&T and Verizon.

AT&T, Verizon and T-Mobile US did not immediately provide comment on the Sprint offering.

The new Sprint plan was reported earlier this week but not confirmed by the company until Friday.

Sprint shares fell 18 cents, or 2.7 percent, to $6.31 in morning trade on the New York Stock Exchange after closing at $6.49 on Thursday. AT&T shares were down 1.5 percent, at $34.29, while Verizon stock was down 1.4 percent, at $47.81, and T-Mobile US shares were down 0.16 percent at $25.02, also on NYSE.

(Reporting by Sinead Carew; Editing by Steve Orlofsky and Prudence Crowther)

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