Sprint Revamps Music Plan

Sprint (S Quote - Cramer on S - Stock Picks) says it will revamp its music offering, dropping a free Sirius Satellite Radio channel (SIRI Quote - Cramer on SIRI - Stock Picks) and adding a 99-cent music download store.

The move confirms a report from TheStreet.com earlier this month that Sprint had chosen Smith Micro (SMSI Quote - Cramer on SMSI - Stock Picks) to provide users music kits for swapping song playlists between PCs and phones.

Smith Micro shares surged $2.01, or 12.5%, to $18.61 after the deal was announced. Sirius was down 4 cents to $3.31.

Sprint's new music store is set to open early next month, and the company has partnered with closely held mSpot to provide 10-channel and 40-channel commercial-free music programming options. Previously, Sirius provided a free music channel to Sprint customers, but now Sirius fans will have to pay $6.95 a month for the service.

The move is big news for Smith Micro, which until now had only Verizon Wireless as a U.S. customer.

Smith Micro's music kit is seen by some industry observers as one of the leading alternatives to Apple's (AAPL Quote - Cramer on AAPL - Stock Picks) iTunes application. Like iTunes, Smith Micro's kit attempts to be a seamless music management program that enables users to download songs and ringtones wirelessly from phone companies and to move music collections back and forth between phones and computers.

The news comes as AT&T (T Quote - Cramer on T - Stock Picks) announced Monday that it will give new mobile-phone customers one year of free access to music on Napster's (NAPS Quote - Cramer on NAPS - Stock Picks) site.

The wireless telcos are trying to establish their own music business in anticipation of Apple's iPhone, which is due out in June.