Sprint: To Have & Have Not

Here in Boston, we stopped believing in curses and jinxes back in October 2004. But the people who live in Overland Park, Kansas, world headquarters of Sprint Corp. (NYSE: S), can be forgiven for feeling that karmic forces are aligned against them.

Sprint has become like the guy Johnson in the Bogart movie To Have and Have Not. Walter Brennan's character says to him, "You're just bad luck, Mr. Johnson." A moment later, Johnson catches a stray bullet and croaks.

Sprint hasn't caught the fatal bullet yet, but it's had more than its fair share of bad fortune, despite (or maybe because of) some incredibly innovative ideas over the years. Sprint was the first U.S. network operator to offer a complete package of wireless services and wireline broadband access and backbone transport on a national level. It did that long before either "fixed/mobile convergence" or "next-gen telco" became buzzwords. Sprint rolled out a triple-play network (ION) way back in 1998 -- a move that scores big points on the visionary scale, but one that turned out to be a huge financial disaster.

Sprint's track record since ION has been more of the same -- a pattern that Mr. Brennan's character would describe as being "bit by a dead bee." Its failed merger with MCI may not have caused the popping of the first telecom bubble, but it certainly helped accelerate that deflation. Sprint spent way too much money for Nextel and couldn't swallow it, integrate it, or otherwise leverage its brand and technology.

I once nearly got laughed out of an executive briefing when I suggested to Sprint execs that they open Nextel's push-to-talk (PTT) technology to the market to create service bundles that could capture more customers from competitors. That didn't make sense to that era's leadership, but where are they now? Since bundling creates stickiness, the idea of building packages on PTT to make it attractive to a wider range of customers and competitors' users who might have switched looks pretty good.

Over the last week, we've seen a flurry of activity from Sprint, including new ventures with Clearwire LLC (Nasdaq: CLWR) and others, troubling financial results with huge customer losses, and inklings of a potential Nextel sell-off. Meanwhile, AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) have put together portfolios that the old Sprint had and squandered.

Whether Sprint can ever overcome its demons is an open question. But it needs to tread carefully: The next dead bee it steps on could be its last.

— H. Paris Burstyn, Senior Analyst, Heavy Reading

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