Some Advice for Sprint Nextel

The news that Sprint Nextel chairman Tim Donahue is stepping down, effective at the end of this year, raises the possibility of another reshuffle, and more consolidation, in the Big Four U.S. carrier lineup.

With Sprint Nextel's share price down 25 percent for the year, some analysts have said that the only viable choice for CEO Gary Forsee is to seek a buyout offer, presumably from T-Mobile, currently stalled in fourth place behind Verizon, Cingular, and Sprint and with a parent, Deutsche Telecom, thirsty for growth avenues. Such a merger would be even bigger than the Sprint Nextel marriage, which by all reports has not gone completely smoothly, with no guarantee that it would work out.

Another possibility would be to sell out to one of the big cable companies. Last year Sprint signed a deal with a consortium comprising Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Inc. (NYSE: TWX), Cox Communications Inc. , and Advance/Newhouse Communications to bundle Sprint mobile phone service with the cable companies' existing high-speed data, voice and video packages.

Whether such a buy-out happens or not, Sprint Corp. (NYSE: S) CEO Gary Forsee has a tough task ahead of him in charting a course for the troubled carrier. (See Sprint Cuts COO.)

Here's some unsolicited advice:

  • Figure out what you want the company to be when it grows up. Right now Sprint Nextel is all over the map, with the cable deals, ill-conceived wholesale "MVNO" tie-ups (including Mobile ESPN, which was shuttered last month), costly next-generation network programs including an EV-DO upgrade to its existing 3G network as well as an ambitious plan to roll out WiMax in the coming years, its core consumer mobile service, and so on and so forth. Find a profitable path to growth and concentrate on it.

  • Bet on the future. The EV-DO upgrade has been a rare bright spot for the company -- business travelers rave about it -- and the bet on WiMax was a bold act. Don't give up on new technologies because of current road bumps.

  • Build an effective enterprise unit. In August, Sprint said it's launching a set of "Advanced Wireless Solutions" for business customers. A spin-off, Sprint Enterprise Mobility, offers "managed mobile services" to businesses. This is a high-growth area and Sprint could carve out a sizable niche in providing an array of services to enterprises -- but the Enterprise Mobility arm is hampered by its links to Sprint's struggling mainline business. If SEM can achieve its own brand identity, and the Advanced Wireless Solutions prove cost-effective, the enterprise sector could be a "difference-maker" for the carrier, as college football coaches like to say. (See Going Mobile? Get Help .)

Further carrier consolidation is unlikely to be great news for enterprise customers. Here's hoping Sprint Nextel can figure it out on its own.

— Richard Martin, Senior Editor, Unstrung

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