Is it Already Too Late for Sprint?

The long wait seems about to be over for Sprint (NYSE: S  ) investors, as the nation’s third largest wireless carrier announced a July 15 launch date for rolling out its next-generation Long Term Evolution (LTE) technology-based network standard across five cities. The only question on everyone’s mind at the moment should be: Is it already too late for Sprint to catch up with larger rivals Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) , and break into their joint stranglehold over the wireless carrier space? Time to give you a clearer picture.

What seems to be the prime concern is the fact that the gap between Sprint and the other two is quite big, with Verizon’s LTE network covering 304 cities compared to AT&T’s 41. Incidentally, Verizon is 18 months ahead of Sprint in setting up the LTE network, and AT&T is staying around 10 months ahead. Sprint deserves admiration for remaining optimistic about its prospects in this situation, which has been made all the more difficult by the fact that it has posted five consecutive years of losses. 

These are not the only reasons why Sprint needs to speed up. The company is already actively selling next generation LTE-enabled smartphones, such as the Samsung Galaxy S III, but it doesn’t have a matching network to offer its customers. The problem will inevitably become more intense because the Apple iPhone is almost sure to have LTE capabilities. Keeping these factors in perspective, the July 15 launch seems to have come at just about the right time. 

Sprint has already suffered heavy customer erosion – it’s lost around 192,000 contract customers as it’s gearing up to shut down its outdated Nextel network. That data in itself is quite scary for a company that has already committed to Apple (Nasdaq: AAPL  ) to sell around $15.5 billion worth of iPhones over the next four years. At the same time, Sprint knows that this is a make-or-break situation, as it plans to spend a whopping $10 billion on network expansion efforts. This is one company I would be keeping a close watch on, and you can also do the same by adding Sprint to your very own free watchlist.

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Fool Contributor Subhadeep Ghose doesn’t own shares in any of the companies mentioned above. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 28, 2012, at 8:22 PM, conradsands wrote:

    Maybe 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 try to push the U.S. market into a wireless industry duopoly -- the American consumer. For the post-paid customer, the fact remains that Sprint is the only U.S. carrier to offer them the iPhone experience with unlimited data plans starting at $79.99 per month. Plus, Verizon now charges its customers $30 to upgrade to a new phone when they renew. AT&T charges $36. But Sprint only charges $18. An investment writer recently summed it up best: “Sprint offers the best value proposition for a new smartphone user. I got my first smartphone on Sprint because a new AT&T or Verizon data plan is outrageous. My Sprint plan includes 450 afternoon mobile-to-landline minutes, unlimited other minutes, and unlimited texting and data for $79.99. Unlimited AT&T or Verizon plans would approach $150, and to get a comparably-priced package, I'd have to settle on limited data or texting plans, which I'd have to constantly try to not blow through. Why get a smartphone if you can't have fun using it?” Sprint also placed first in the industry in customer satisfaction, according to results from the 2011 and 2012 American Customer Satisfaction Index.

  • Report this Comment On June 28, 2012, at 10:46 PM, Aryabod wrote:

    Sprint's current CEO, Dan Hesse, took over the helm of the company in 2008 after a dissastrous merger with Nextel, only to have to write down the $36 billion it incurred. In doing so he has navigated his ship to open waters, however the path was far from smooth.

    For the uninformed and myopic mindset of many analysts, his recent moves appear to have put the company in a zugzwang. However, to those with a little savvy and perspicacity it shouldn't be difficult to discern how the Maestro, Hesse, has outwitted his foes.

    Lets just touch upon a few of his recent moves:

    1. He orchastrated a stiff resistance against his nemisis, ATT, by preventing a 39 billion merger with TMobile, which ended up costing ATT at least $4.5 billion and TMobile droves of unhappy customers.

    2. When Lightsquared appeared to be floundering he began his own FD LTE buildout forthwith and amended his ties with Clearwire. Clearwire subsequently agreed to buildout their own TD LTE network with Sprint's assistance, which is slated to be launched in June of 2013. You should also note that Clearwire is in collaboration with China Mobile in building out their own respective TD LTE networks, which are supposed to be four times faster than FD LTE. (China Mobile has 675 million subscribers)

    3. Currently Sprint is on schedule to have 125 million POPS of FD LTE up and running in the same quarter that the next iteration of the iPhone is to be launched. This will only be 25 million POPS short of ATT's scheduled FD LTE buildout by Q4 2012, however going into 2013 the game will begin to slant in Sprint favor. For one Sprint, unlike the competition, is building out its FD LTE platform from scratch, hence upgrading its network to LTE Advanced will only need a slight programming upgrade.

    4. Sprint's launching of the iPhone has most definately been beneficial to the company. In the first two quarters they sold over 3.3 million iPhones, which is 300,000 more than their needed quota. Of the 3.3 million iPhones sold, 1.5 million were new subscribers and according to my chanel checks Sprint appears to have once again met their quota of iPhone sales. With the introduction of the iPhone via Virgin starting on the morrow and through Boost Mobile in September, Sprint should have no trouble meeting their iPhone quotas. In fact Dan Hesse indicated they could quite easily have underestimated the demand for iPhones by Sprint customers.

    3. Sprint's foes, constantly remind us that Sprint could go into bankruptcy. Well, Daaaaaaaaa! that could happen to 80% of the S&P 500. Did they forget that Apple at one time was supposed to go into oblivion? As recently as 2008, Ford was supposed to be on its demise, did they forget that? In case you didn't know Sprint recently secured $3 billion in vendor financing and raised sufficient funds to leave it with close to $8 billion in cash. Now, you would have to be an idiot or dunce to loan a company billions of dollars if you thought they were on the brink of Bankruptcy.

    4. In 2010 Sprint had 48 mililon subs, however at the end of Q1 2012 Sprint had 56 million subs.

    5. By June of 2013, Sprint's iDen network will be completely eradicated. In sum they will no longer have two networks and will have lowered their tower count from 68K to 38K, saving them close to $500 million per quarter.

    6. The company's network overhaul and upgrade, known as Network Vision will be consummated by 2013, saving the company billions of dollars in expenses and making more efficient use of its current resources, such as the repurposing of their 800 Mhz spectrum currently being used by Nextel and enabling its new network to host disparate spectrum from other carriers.

    In conclusion I feel TMobile and Sprint are destined to eventually merge, however I don't see that happening until one of the two gets their act together. In this case it appears to be Sprint. If Hesse gets to execute his plans the company will have no difficulty ensconcing itself above $12, which would leave it with a Market Cap over $36 billion.

  • Report this Comment On July 02, 2012, at 9:33 AM, FirstGratefulDad wrote:

    Aryabod, that was amazingly said and should leave no one questioning Sprint's survivability. My only concern with you're statement is that Sprint and TMobile are destined to merge, I believe it should and will be a merger between Sprint and Century Link.

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