Why Sprint’s Terrible Service Doesn’t Matter

According to Consumer Reports, Sprint (NYSE: S  ) is the worst of the major US wireless carriers, coming in dead last on a number of factors including network quality and value. Sprint told CNet that it wasn't surprised -- ongoing upgrades to its network are weighing on quality.

Sprint has lost millions of subscribers in recent quarters; as someone who abandoned Sprint just a few months ago, I can personally attest to the carrier's problems -- the sluggish data speeds, the poor reception, etc.

And yet, despite Sprint's issues, I think it's an interesting investment for someone who's willing to stick it out over the long term. Sprint's network potential, the possibility of a Dish Network (NASDAQ: DISH  ) deal, and T-Mobile's (NYSE: TMUS  ) recent success stand out as reasons to like Sprint.

Sprint is a sleeping giant
Sprint's network may be the worst today, but in a few years it could be the best. When it comes to spectrum assets, Sprint is a veritable sleeping giant; with Clearwire and Nextel, Sprint has more spectrum, and more LTE bandwidth, than any of its competitors.

The problem is execution -- Sprint has set lofty goals in the past, but has failed to live up to them. However, with Softbank now owning the vast majority of the company, and promising to invest billions, Sprint could finally put its assets to use, creating the premiere mobile data network.

The early signs are there: Sprint announced "Spark" in October -- a network that relies on Sprint's extensive spectrum assets. Spark-compatible phones use tri-band technology, letting them tap three different spectrum frequencies at once, in the process offering theoretical data speeds equivalent to Google Fiber. Admittedly, current performance is much less impressive (though still better than the competition) and the markets where it's available, and the number of handsets that support it, are limited.

A Dish Network deal is still possible
Before Softbank finalized the deal, Dish Network tried to buy Sprint, and though it wasn't successful, there are still reasons to believe that a future deal could be possible. Perhaps not a merger, but a partnership that would strengthen Sprint's offering to consumers. When Dish had made its case for Sprint, it had spoken of a combined service, one offering satellite TV, phone and mobile Internet together in a single bundle. The merger may have fallen through, but a deal is still possible.

Dish Network has continued to acquire spectrum assets, even as it lacks a wireless network with which to employ them. Right now, the company is trying to buy LightSquared's spectrum assets out of bankruptcy.

Moreover, on its earnings call back in August, Dish Network's management continued to play up the potential of a Sprint partnership; Chairman Charlie Ergan remarked that Softbank had bested them in the deal to acquire Sprint, but that he "like[d] working with people better than [him]." Ergan reiterated that Dish fits "pretty well" with Sprint, and that there remains a "lot of options" when it comes to working with the carrier.

Subscribers are willing to switch
If Sprint and Dish could offer a great service, consumers would be willing to switch, though it may take a little time. According to a survey conducted by WDS (via ZDNet), only 13% of US mobile subscribers claim loyalty to their carriers -- the market remains wide open.

T-Mobile has used Americans' frustrations with their carriers to fuel its recent resurgence. Although it remains the smallest of the major carriers, T-Mobile is growing the fastest, adding 648,000 new subscribers last quarter. T-Mobile's new "un-carrier" initiatives are likely helping it to grow, as the company has ditched standard contracts and handset subsidies in favor of installment plans and month-to-month service.

Obviously, T-Mobile is a competitor to Sprint, and as most Americans rely on a single carrier, nearly every customer T-Mobile gains is one Sprint doesn't have. Yet, I think T-Mobile's recent growth illustrates that it's possible for a smaller carrier to shake up the market.

Short-term pain for long-term gain
Sprint has been bleeding subscribers for years, and that trend is likely to continue in the near-term -- Consumer Reports' survey suggests that Sprint's customers remain deeply unsatisfied.

Still, the potential is there. Sprint could emerge as a major force in the wireless industry, a company with the most powerful network of all, possibly partnered with Dish, and capturing customers from the other carriers at a rapid pace -- but investors must be willing to wait.

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