Optical/IP Networks

Report: Sprint Positioned Best in U.S.

Sprint Corp.’s PCS division is currently the operator best positioned to make money in the growing U.S. wireless market, according to the latest edition of the Wireless Oracle, which is out now. Unstrung’s monthly paid subscription service, formerly known as the Unstrung Insider has examined the U.S. wireless situation from financial, technological, and marketing angles and ranked the top five domestic carriers.

The report, titled "U.S. Wireless Carriers: Cash is King," names Sprint as the leader of the pack, closely followed by a solid AT&T Wireless, then marketing geniuses Cingular Wireless and lumbering giant Verizon Wireless. Business-oriented Nextel Communications is bringing up the rear.

The factors giving Sprint the edge are its quick move to an all-digital CDMA network and its effective marketing to the consumer sector, as borne out by its subscriber additions in the last reported quarter.

"If we’re to believe the assertions that the upgrade path costs for CDMA are much lower than for GSM/GPRS/EDGE/UMTS, then Sprint will have more capital to devote to marketing, pricing, and other operational uses," writes Jake Kaldenbaugh, an analyst for the Wireless Oracle and this report’s author. "In fact, we would recommend that Sprint push that advantage in funding compelling applications."

The one major dark cloud on Sprint’s horizon is its current corporate structure, which uses tracking stocks for the wireless and wired business divisions. Currently, the financial assets and liabilities of Sprint PCS and its FON wireless are not legally separated from each other. Clearly, the company was set up this way so the legacy landline business could subsidize the buildout of the wireless network. However, the report warns that FON could prove to be a drag on the entire company as the wireless business grows.

Solid is the word that describes the second-ranked company, AT&T Wireless. The company has begun its move to the intermediate 2.5G GSM/GPRS and is starting to reap the rewards from the two-way text messaging and international roaming features this technology enables. The company also scored an oblique hit with its mysterious "mlife" mobile marketing campaign.

However, AT&T Wireless faces some issues with its average revenue per user (ARPU). The latest ARPU trends show that they are being hurt in the price wars. Their ARPU of $58.60 in the first quarter of 2002 dropped approximately two dollars from the fourth quarter of 2001. The company said on its recent earnings call that it may be able to continue to deliver the subscriber growth seen in that quarter.

Verizon’s substantial customer base gives it the lead in wireless service revenues, with over $16.3 billion in the last twelve months as of 1Q02. However, the sheer size of the operation is a liability, according to the report, as Verizon is being hardest hit by the broad economic downturn.

The most puzzling company is Reston, Va.-based Nextel. Despite having a lock on the business market, as well as the highest ARPU and lowest customer rate in the industry, Nextel still gets no respect. This is primarily because its financial position looks weak when compared to its deep-pocketed competitors. On the other hand, Nextel’s single-minded focus on the business market and impressive penetration into that sector make it a compelling acquisition target for other carriers wanting to get in on its game.

Still, there's one whopper of a fly in this ointment: Nextel has concentrated on developing its proprietary iDEN network and refused (in public at least) to convert to a more widely used technology for next-generation services. This means any carrier that bought Nextel would have to spend billions upgrading its network. It's not clear whether operators are prepared to make that kind of commitment.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com The full report, "U.S. Wirless Carriers: Cash is King," costs $400. An annual subscription to the Wireless Oracle is $1,250. For more information, including subscription information and research examples, go to www.wireless-oracle.com.

Editor's Note: Light Reading is not affiliated with Oracle Corporation.

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