Sprint (S) has struggled over the past few years because it lacked a clear identity.
It wasn't a market leader with a top-tier network -- that space was taken up by AT&T (T -1.21%) and Verizon (VZ -4.67%). It also wasn't the consumer-friendly industry maverick. That role has been filled by T-Mobile (TMUS 0.02%).
For a long time Sprint was just-another wireless player, a company without an identity or a purpose. Consumers clearly reacted to the brand accordingly, causing it to fall from third to fourth behind T-Mobile in subscriber count.
Recently, however, Sprint has found its footing under CEO Marcelo Claure. The company has seemingly borrowed a bit of T-Mobile's marketing plan, pushing itself as a cheaper alternative to Verizon and AT&T with a good enough network.
Paul Marcarelli is very well-known for his Verizon ads. Image source: Sprint.
Those efforts have included cheeky ads with Paul, Verizon's former "Can you here me now?" pitchman. Those commercials, along with some very bold pricing stunts and a changing marketplace, have given Sprint new life. The company remains fourth in a four-company field, but there are some strong reasons to invest in Sprint shares going forward.
Sprint has stabilized
The company finished 2016 with its highest postpaid phone additions in four years. It added just under 1 million post-paid customers for the year, and returned to pre-paid growth in Q4, adding 180,000.
The company did lose money ($1.2 billion), but it showed signs it was getting its fiscal house in order. Sprint had its highest operating income in 10 years, and reduced costs on an ongoing basis by $2.1 billion.
"Sprint took a big step forward in the second year of our turnaround plan," said Claure in the company's Q4 earnings release. "Net operating revenues returned to growth and cost reductions accelerated, leading to the highest operating income in a decade and a return to positive adjusted free cash flow."
Sprint is in play
The cable and internet service provider businesses have consolidated. Many smaller players like Cablevision and Bright House have been purchased by larger companies, leaving few viable assets on the market.
Sprint has its issues, but it's easy to see how it would be of interest to Comcast and Charter Communications. Those two companies are already negotiating with Sprint, and while those talks are reported to be about a partnership and/or an investment, it's likely both companies would be interested in an acquisition.
Even if they are not, the appearance that they are could help Sprint fetch a higher price in any deal. That could mean being bought out by T-Mobile, a deal which has been discussed on multiple occasions, or another company stepping in to make an offer.
Market share is available
Sprint has reversed its customer losses partly because of the cleverness of its marketing, but also partly because of its truth. The company has essentially been saying that since all networks are now equally good, consumers should switch to a cheaper carrier.
That's true enough that the public has slowly started to catch on. Even people who have had AT&T and Verizon for a long time may now be willing to switch because the price difference can be significant. T-Mobile has largely been the winner so far when it comes to consumers going cheaper, but Sprint has begun to capitalize by offering lower prices.
Pricing changes often, and special deals pop up all the time, but Sprint generally has the cheapest unlimited deals for families. In a broad sense, Claure's company is price-competitive with T-Mobile, and both come in well below what AT&T and Verizon charge.
Going forward, as more people have positive experiences with the cheaper carriers, more people should be willing to switch. That should help Sprint continue its positive momentum and add more subscribers.
