Sprint Nextel Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sprint Nextel (NYSE: S  ) fell more than 12% in early trading before closing off 7%. The nation's third-largest carrier reported better-than-expected third-quarter results but scared investors by committing to a new deal with Clearwire (Nasdaq: CLWR  ) .

So what: Just last month, Sprint said it would build an LTE network with LightSquared. Today, CEO Dan Hesse told investors that Sprint and Clearwire had entered a "nonbinding cooperation" agreement to build yet another LTE network. To say this is getting silly is insulting silly people.

Now what: Either way, Sprint needs a faster data network to keep pace with the LTE buildouts under way at AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) . I'm just not sure a deal with Clearwire will help much, if at all. Do you agree? Disagree? Please weigh in using the comments box below.

Interested in more information about Sprint Nextel? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 26, 2011, at 7:03 PM, hunterintustin wrote:

    i am not sure if you listened to the webcast of the quarterly presentation but Sprint's CFO made it clear: Clearwire has to fund it's own LTE network. What Dan Hesse told the audience was simple: We are working WITH Clearwire to be able to integrate their new LTE network with Sprint's proposed LTE network.

    Sprint will continue to use Clearwire for WiMax (way beyond the 2012 stop of WiMax equipment sales) because the current subscriber base needs service. Sprint will not shut off their WiMax customers and force them to buy a new handset.

    Clearwire is still running as independent company which offers wholesale capacity and Sprint just made it clear that they intent to use Clearwires spectrum holdings for the long term.

    Start to listen to the fine details presented and you would not look stupid with your comments.

  • Report this Comment On October 26, 2011, at 7:13 PM, conradsands wrote:

    Sprint is the only U.S. carrier to offer new and existing customers the iPhone experience with unlimited data plans starting at $79.99 per month. Sprint has been recognized as a J.D. Power 2011 Customer Service Champion — one of only 40 companies to have earned this distinction this year. To qualify for inclusion on this elite list, the companies must not only excel within their own industry, but also stand out among leading brands in 12 major industries evaluated by J.D. Power and Associates.

  • Report this Comment On October 26, 2011, at 7:14 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

    “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

  • Report this Comment On October 27, 2011, at 7:42 AM, lucasmonger wrote:

    Yes, from a percentage point basis, it plunged but I would hardly call 19 cents anything to cause dire concern. While hovering around $2 per share the stock is going to "pop" and "plunge" all the time because of the small denominator in the calculation. If the stock ever got to $20 per share, then the dynamics change entirely.

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