Dusk for Sprint Nextel?
I don't like picking on Sprint Nextel. I've been a longtime fan of its vision, and I'd like it to succeed. But its three major competitors – AT&T Inc. (NYSE: T), T-Mobile US Inc. , and Verizon Wireless – are all gaining customers, and Wall Street analysts are making bearish calls. Maybe I'm piling on; kicking it when it's down. But what confidence can I derive when it introduces a flat rate per customer that can only increase revenues when there's a growing customer base?
That pricing structure, continued emphasis on its Nextel push-to-talk applications, and music downloads for its consumer wireless customers will not increase ARPU or subscriber loyalty. Consumer services make impressive headlines because of the large numbers of customers and revenue involved. But telcos derive comparable revenue and more profit growth from enterprise customers.
Telcos with plans to deliver next-generation services have made sweeping changes to their networks, organizations, management structures, and corporate cultures. My forthcoming Heavy Reading report, "Telco Transformation: Change or Die Trying," shows that telcos that don't make these sweeping changes will find themselves trading commodity bandwidth at ever-shrinking margins. Sprint Nextel took a step in the right direction by recruiting new executives. Now they must pull together the carrier's wireless and wireline facilities to deliver sophisticated communications and applications management services for enterprise customers that will sign long-term contracts to guarantee ongoing revenue and profit.
CEO Dan Hesse and his executive team must unify all their espoused plans, integrate their goals, and act decisively to implement them. Hesse accepted this mission when he took over. His legacy at Embarq Corp. (NYSE: EQ) demonstrates that he can establish a positive market position.
Sprint should not go gentle into that good night; now it must rage, rage against the dying of the light – and leverage its impressive human and technology resources to regain its market credibility and customers.
— H. Paris Burstyn, Senior Analyst, Heavy Reading
"Telco Transformation: Change or Die Trying" is forthcoming from Heavy Reading in August 2008. Check www.heavyreading.com for updates.