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Sprint comeback: Hard, but doable

Despite gloomy news, analysts optimistic on Sprint turnaround

By Brad Reed, Network World
March 03, 2009 01:48 PM ET

Network World - 2008 was a bad year for Sprint.

The carrier not only posted an annual loss of $2.8 billion, but also lost more than 4 million wireless subscribers and wound up laying off 8,000 workers this past January.

Sprint's competitors, meanwhile, all seemed to extend their advantages over the beleaguered carrier. Buoyed by the release of the iPhone 3G, AT&T added nearly 7 million new wireless subscribers in 2008 while posting earnings of $12.9 billion for the year, a 7.7% increase over its 2007 earnings. Verizon, meanwhile, added 6.3 million new wireless customers while posting a net income of $6.4 billion, a 16.4% increase from 2007.

But despite all the gloomy numbers, Sprint still does have some things going for it. Now that the company has gotten its WiMAX network off the ground with the help of its partners in the Clearwire coalition, for instance, Sprint can offer high-speed mobile broadband services to customers roughly two years before rival carriers start offering 4G Long Term Evolution (LTE) cellular voice and data services. Clearwire plans to aggressively expand its WiMAX coverage this year by spending the $3.2 billion it raised from Google, Intel and other investors last year for the network buildout.

Robert Rosenberg, president of Insight Research, says Sprint's WiMAX investment could be particularly useful in gaining back some of the local access broadband customers that Sprint lost when it spun off its local division during the Nextel merger in 2005.

"Sprint made a strategic bet with WiMAX technology and what they can do to it," he says. "They're thinking of reinvigorating their local access business for broadband… That access strategy could help them gain more customers for their voice business as well."

The company's WiMAX investment may not go off as smoothly as planned, however, as Clearwire CEO Ben Wolff recently indicated that tight credit markets could hinder the company's ability to raise additional capital for further expansions, thus potentially slowing down its nationwide deployment.

"Sprint wants to be the data leader on the 3G side and the WiMAX side," says Gartner analyst Alex Winogradoff. "The WiMAX investment is a great investment but if you don't build it out, you won't keep your advantage."

But even if the poor economy slows down Sprint's WiMAX rollout, it could also give the company a boost by pushing more subscribers to some of its low-cost wireless plans. In response to the current recession, Sprint last month unveiled a plan that allows users to have unlimited calling, texting and Web use for $50 a month. There is, however, one potential problem: The service is only being offered over the iDEN network, which is slower than the CDMA-based 3G network and has caused Sprint problems since being acquired in 2005. Despite this, IDC analyst Courtney Munroe thinks that if they're marketed well, Sprint's inexpensive wireless plans could become the go-to option for bargain-hunting wireless customers.

"This economy is kind of good for them because people are focusing on value, not the real high-end phones," he says. "People are saying that maybe they should cap their data usage and go to a prepaid plan from a postpaid plan."

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