Some ideas to help the struggling carrier get back on its feet
With Sprint continuing to experience lower profits and customer defections, we examine some ideas to help the company regain its footing in the telecom market.
Three weeks ago, new Sprint CEO Dan Hesse told USA Today that his company was considering offering flat-rate pricing for unlimited voice calling as a way to shake up the wireless status quo. Just more than a week later, Verizon, AT&T and T-Mobile all beat Sprint out of the gate, announcing unlimited wireless calling plans starting at $99.99 a month for both consumers and businesses.
Sprint has since tried to steal back some of the thunder from its competitors by announcing its own unlimited “everything” plan that would give customers unlimited voice, data and multimedia services for $99.99 per month. While this plan seems to be a better bargain than the Verizon and AT&T plans – which only offer unlimited voice services for a monthly $99.99 charge – it is unlikely to make the big splash that Hesse had initially hoped for, since Sprint’s three biggest rivals came out with their own flat-rate wireless plans more than a week before. After all, as Hesse pointed out in his USA Today interview, he’d prefer that his company be “on the offensive rather than the defensive” and that if Sprint can’t differentiate itself from its competitors then it “can’t win.”
Hesse’s desire to give the wireless market a jolt is understandable, because Sprint has been stuck in a rut since its 2005 merger with Nextel. Over the past couple of years, Sprint has faced problems ranging from continued difficulties in integrating former Nextel users into the Sprint network, subpar marketing campaign, and investor nervousness over the future of its $5 billion WiMAX investment to a shrinking subscriber base. Last week brought more bad news from the carrier, as it reported a $29.5 billion fourth-quarter loss that was caused by a write-down from 2005 Nextel merger and an ever-shrinking customer base. Additionally, rumors have been swirling around that Qwest will soon switch its wireless service provider from Sprint to Verizon in order to increase the quality of its cell phone offerings.
Can enterprise services lift Sprint?
But even with all this, a Sprint comeback isn’t completely out of the realm of possibility. Some analysts think that there are enough unmet demands in the wireless telecom market for Sprint to carve out a niche for itself and improve its standing as a brand. Forrester analyst Lisa Pierce, for instance, thinks that Sprint could “cause significant nightmares for competitors” by refocusing its commitment to enterprise customers and billing itself as a backup carrier for business sites that use incumbent carrier T1 services.
Pierce acknowledges that this sounds counterintuitive, because being a backup provider typically “doesn’t generate a lot of revenue,” but she says it could offer a foot in the door for businesses that are “frustrated with ILECs and anxious for alternatives.” The best way for Sprint to accomplish this would be to use Xohm, which serves as Sprint’s planned WiMAX service, as a primary fixed line access service that could support both voice and data.
“For this to make financial sense for Sprint, a company would have to commit to putting minutes and megabytes over Xohm, and move from a secondary to primary access arrangement,” she says, although she adds that this plan could lead to a shortage of WiMAX spectrum on a local basis, since consumer mobile Xohm applications would have to contend for spectrum with the business users.
Nemertes Research analyst Mike Jude also thinks Sprint could rework how it delivers services to enterprise customers by expanding the scope of wireless business services beyond the basic voice and limited data offerings currently provided for mobile workers.
“If I were running Sprint, I would get together with a company like IBM Lotus or Google,” he says. “And I would put together a killer collaboration application suite armed with some good business productivity tools and I would package it with a reasonable access plan aimed at small and medium business users.”
Jude thinks that a collaboration package between Sprint and a company that has a strong reputation for designing business applications could be “a real winner if it were designed to run on broadband wireless and were offered as a service.” With more networks switching to open access, Jude says, the usefulness and diversity of service offerings will become carriers’ crucial margin to differentiate themselves.
Think small for big results
Others think that Sprint is already moving in the right direction to retake portions of the consumer market, and that it’s only a matter of time before its upcoming slate of services starts to have an impact. Gartner analyst Tole Hart says that Sprint could cut its “flat-rate everything” rate down by offering unlimited in-house coverage for families who purchase femtocells, which are devices that use short-range cell phone frequencies to route wireless calls through your home broadband connection. Last year, Sprint rolled out its Airave devices in Denver and Indianapolis, marking the first time a major carrier has sold femtocells in metropolitan markets.
Hart says the advantages for Sprint here are obvious, because femtocells route calls through IP, thus freeing up more space on Sprint’s wireless network. With more capacity on its network, Hart notes, Sprint could offer some reasonably priced flat-rate family wireless plans that would appeal to families who struggle with frequent overage charges.
“People would basically like that because they wouldn’t have to worry about teenagers going over on minutes,” Hart says. “That’s something that could definitely have traction in the market.”
Sprint also could get a boost if it is successful in its new negotiations with Clearwire to create a nationwide WiMAX network. Although the two companies had broken off their plans to build a jointly operated network late last year, they’ve recently begun talking again, and Intel is rumored to be investing more than $2 billion into the venture. With other carriers looking at deploying LTE for high-speed mobile broadband by 2012, Sprint and other WiMAX providers will have a two-year window to sign up consumers for their mobile broadband services without significant competition from other 4G technologies.
No matter what course of action Sprint eventually decides to take, telecom analyst Jeff Kagan says it’s encouraging to see the company talking about making big, industry-changing moves.
“I have learned to never underestimate Dan Hesse,” Kagan says. “When he was running AT&T wireless in the late 1990’s he changed the entire industry with his Digital One Rate. He could be looking to do the same thing again… The interesting is it has us all talking about Sprint in a come-back frame of reference.”
