Sprint's announcement of a combined Internet/long-distance services package offers investors a preview of one likely future for the telecom industry. Should Sprint add wireless services to the mix, it would have a leg up on competitors in providing much-hyped “bundled” services.
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Sprint makes a run at the single life
Most recent media coverage of Sprint has focused on how the company will perform as an independent carrier. Sprint has frequently been the subject of buyout rumors, and of course was planning to merge with WorldCom (Nasdaq: WCOM) until the deal was squelched in July by U.S. and European regulators. Nevertheless, today's announcement indicates that the company is not standing still -- which is fortunate since it can ill-afford to do so in the fast-paced, highly competitive telecom industry.
From voice to "consumer solutions"
Like all telecom carriers, Sprint is facing tough price competition for long-distance consumer voice services. Yesterday's move is one way of bowing to the inevitable: In the near future, carriers are likely to make long distance a commodity offering on top of more extensive Internet, data, and video services.
This certainly seems to be where Sprint is headed. The company's Marketing Vice President Bernie Amyot told Bloomberg that the combined offering represents a move into the "consumer solutions space," and away from simple long distance. Presumably "consumer solutions," aside from being marketing jargon, is a catchall term for the current and future services the company may offer.
While Sprint obviously hopes that heavy long-distance users will sign up for the package, the company's main interest is increasing its Internet access and data business. Sprint offers dial-up and DSL Internet connections through EarthLink, in which it owns a 27% stake.
The company cites Cahners In-Stat Group's estimate that 14 million households will add Internet connections this year, bringing the proportion of U.S. households with 'Net access to 60%. Sprint wants to get a big chunk of those newcomers, as well as its current long-distance customers who use a different ISP, to sign-up with EarthLink. The company estimates that it and Earthlink only have "several hundred thousand" of the same customers.
Future bundles?
Thanks to its wireless subsidiary Sprint PCS (NYSE: PCS), Sprint has the potential to add other services to the package. While Amyot would not make any specific promises, he told Bloomberg that "I would expect in the coming months, you will see us introduce more bundles." The company tested a plan in Denver last year that enabled customers to apply their Sprint PCS wireless minutes to their long-distance phone bills.
Should Sprint introduce a package that includes wireless, it would put them in a pretty good position in the race to offer bundled services. While Regional Bell Operating Company (RBOC) Verizon (NYSE: VZ) is offering unified billing in parts of New York state for local, long-distance, and Internet access, Sprint could be the first to offer a nationwide combination of telecom services.
Whether such a package will prove as attractive to consumers as many speculate is another question.
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Verizon's Other News, Fool News & Commentary, 8/4/00
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