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Sprint (and Softbank) at a New Crossroads

Sprint has struggled to convert networks from a mix of CDMA and proprietary Nextel iDen technology to LTE, a task complicated by the lack of greenfield (unused) spectrum to transition users into the competitive 4G+ networks.  The result has been a transition fraught with 'rip and replace' disruption.  This leads to a competitive problem: as current customers contract end, a decision presents itself, "Do I stay with Sprint or do I try T-mobile, Verizon or AT&T?"  This is not simply a problem of upgrading network performance but of winning back jilted customers.


Every seasoned businessman understands implicitly that it is easier and cheaper to keep a customer than it is to win them back, a cardinal rule of business.  The relationship with customers has become more important and less fungible as the US market has matured, sending churn rates among all major operators to lower than 2%.  Sprint is at a crossroads at which it has made marked improvements in network performance.  Unfortunately, this comes at a difficult competitive juncture: the market has reached close to basic saturation.  The growth is occurring in multiple device subscriptions to existing subscribers rather than gains in new customers coming into the market.  


What will Sprint report in subscriber gains/losses and sales and earnings figures?

Sprint has turned in six quarters of results in which the impact of network conversions and upgrades were expected to have shown a bottoming and, then, the upturn in subscriber counts, sales, and margins.  Instead, the results have fallen bellow expectations and far bellow that of closest rival T-Mobile.


What are some of the underlying causes, what can Sprint do to fix problems while lowering the cost of building networks and winning over and retaining customers?


We have long expressed the opinion that Clearwire and then Sprint must approach the use of their largest spectrum resource in a way that suits the higher frequency 2.5-2.6GHz band 41: an integral network and device product mix combined with a hybrid method of deployment that now looks similar in many respects to the combination of WiFi and 4G wireless.  


What can this look like and how would that impact costs, relationships with customers and network performance?


Pending tomorrow's quarterly release and conference call, Maravedis will provide its thinking on where Sprint can head and how that might impact the trends seen for T-Mobile, Verizon, and AT&T.