Things are not looking particularly rosy for Sprint Nextel today. Its shares are down more than 16 percent, to about $4.30 per share, as of this writing. It looks even worse for Clearwire, whose shares are down about 20 percent, trading at a meager $2.21.
These two are joined at the hip, although they do seem to be drifting apart, maybe because of prior rifts and Sprint’s decision to do a 15-year deal with LightSquared. Regardless, things are getting more complicated for Sprint by way of all its deals with, let’s just say, “everyone else,” and it’s getting harder to determine where the service originates. Ericsson manages Sprint’s network, but the carrier also is dependent on Clearwire for WiMAX – which also has a network outsourcing deal in the works with Ericsson – and now LightSquared is, as widely expected, added to the mix.
Basically, Sprint needs to sell an iPhone, and preferably one that is snazzier than the $49 3G S that AT&T is selling and at least as good as the version 4 that Verizon Wireless sells. Sprint CEO Dan Hesse was asked about the iPhone in today’s conference call with analysts, but he gave no hint, not even a smidgen, that Sprint will get an iPhone. Not now, not in the fall. Hesse did, once again, acknowledge that devices are becoming a larger and larger piece of the pie when it comes to the choices consumers make. Price, value, network quality, customer care and more are some factors, but the device is growing ever more in importance. Iconic devices, in particular, drive choices, and what could be more iconic than the iPhone?
During the second quarter, Sprint did what it could to boost its device portfolio, which should get even better with the arrival next week of the Motorola Photon, billed as the first international 4G smartphone. It’s got the HTC Evo View 4G, HTC Evo 3D and Nexus S 4G from Google. There’s also the Motorola XPRT, Sprint’s first Android smartphone geared for enterprise-class security with international roaming, and more are coming from Motorola, including the Triumph, an Android smartphone for the Virgin Mobile prepaid brand.
But it doesn’t have Apple’s iPhone, and while June was a good month for Sprint, the second quarter was the first full quarter when it went up against the iPhone at Verizon Wireless and the $49 iPhone that AT&T is offering. Meanwhile, Verizon launched three new LTE devices and more LTE markets during the quarter, and as we all know, AT&T is coming down the pike with some LTE markets of its own here pretty soon.
Sprint earlier had said it would give an update on its Network Vision plan this summer, and today would have been a good time for that, but now it’s not giving any more details about its network evolution until early October. So we are left wondering exactly what its plans are for LTE, notwithstanding the deal with LightSquared that is contingent on the latter settling its interference problems with GPS.
To be sure, Sprint has made and continues to make great strides across the board. It just completed its 14th consecutive quarter of improved customer care satisfaction – no small feat when you consider where it started. Postpaid churn is improving, and prepaid did quite well, driven by the government-subsidized Assurance brand.
But even with leadership that has done a stellar job of turning the ship around, that doesn’t appear to be enough. In a research note, Sanford Bernstein senior analyst Craig Moffett summed it up: “Sprint’s rock is rolling back downhill not because of lack of effort, or even of execution, but instead because to be in the middle market is to be in the wrong place at the wrong time, in our view.”
Their reasoning goes something like this: Sprint is strong on the lower end with prepaid, including Boost Mobile, and it is playing at the top end with the Evo franchise, “even if that franchise is looking shakier by the day as Clearwire’s 4G network stagnates,” Moffett adds. But the core business is the middle market postpaid CDMA Sprint brand, and that’s the part that’s in trouble.
Everyone (well, not everyone, but you know who you are) wants to see Sprint succeed as a profitable competitor in the wireless marketplace. C’mon, Mr. Jobs, can’t you give a guy a break and deliver an iPhone (both black and white versions, please) to Sprint that it can sell to the masses? Android is eating your lunch over there (to the extent anyone can). Sprint could further drive home the message that it’s got “the best” unlimited data plan. It’s got plenty of capacity, so that shouldn’t be a problem. Who knows? Maybe Christmas will come early. But I wouldn’t count on it.