Virgin trial offers free service with handset purchase

Virgin Mobile is experimenting with a temporary promotion that offers five free months of service with the purchase of a $180 phone.

The offering, which is available only at select Best Buy stores, includes five months of Virgin’s basic plan free with the LG X Power smartphone, as first reported by Wave7 Research. The plan, which typically costs $35 a month, includes unlimited talk and text and 5 GB of data before reducing users to 2G speeds for the remainder of the billing cycle.

“A 12/9-4/4 trial of five free months of Virgin’s $35 plan is underway at select Best Buy stores, requiring purchase of an LG X Power at $179.99,” Wave7 reported this week. “Boost has been broadly experimenting with comparable trials involving 2-3 free months.”

A Sprint representative didn’t directly answer questions from FierceWireless regarding the trial, but the carrier has acknowledged that it is tinkering with different strategies to regain lost ground in the prepaid market. Sprint saw a net loss of 427,000 prepaid users in the third quarter last year, and a relaunch of its Virgin brand that had been scheduled for 2016 was quietly pushed back to sometime this year.

Virgin recently consolidated its offices and signed a long-term lease in downtown Kansas City, Missouri, where it plans to hire 100 employees.

“I envision Virgin as being our disruptive brand,” Sprint CEO Marcelo Claure said during an investors conference last week. “You’re going to see us test different models. One model we’re testing that we like is a potential—rather than subsidizing handsets, actually providing free airtime with no subsidy on the handset. So you’re going to see Virgin be our disrupter brand. And you’re going to see Boost be a very strong brand that can give good competition to both Cricket and Metro.”

The ARPU gap between prepaid and postpaid users has narrowed significantly in recent years, prompting carriers to target that market more aggressively. Even Verizon, which not long ago relegated its prepaid business to the MVNO TracFone, has refocused on prepaid, updating its pricing structure late last year to better compete in that market.

Sprint’s Boost brand finally returned to growth late last year, but the operator still faces some major challenges as it looks to regain its lost footing in prepaid, however. While the ARPU gap is shrinking compared to postpaid, increased competition has narrowed profit margins.

Sprint, which continues to face serious financial hurdles, may have to come up with an innovative strategy to win back prepaid users in a way that boosts the bottom line.