Are Short-Sighted Sprint Investors Throwing Out The WiMax Opportunity With Forsee?
from the risk-vs.-reward dept
As per the rumors circulating for just a few days, activist investors, and disgruntled shareholders have ousted Sprint CEO Gary Forsee. There are three main reasons for the ouster -- and not all of them make sense.
- Sprint has a relatively high churn rate among the majors, and is
acquiring new customers much more slowly than chief wireless rivals AT&T
and Verizon. For the next quarter, Sprint has issued guidance that they
will suffer a net loss of over 300k subscribers, which is atrocious in a
time when AT&T and VZW are net adding about 1.5M each. There seems to be
no resonating marketing message, and the brand is suffering.
My take: This is a problem that can be blamed on Sprint management and marketing execs, and possibly right up to Forsee. Sprint needs to find a message that resonates with customers, stick to it, and rebuild the brand. Realistically, their service is scarcely better or worse than the other oligopilists, but the perception is that it is worse.
- The Nextel merger is not going as well as expected, with delays in
integration, and frustration and churn among Nextel's formerly loyal
blue-collar Push-to-talk (PTT) base. Prior to acquisition, Nextel was the
goose that laid golden eggs, with ~$70 ARPU, but that goose is plucked.
My take: The roots of this problem stem from the "Nextel Spectrum Swap" that was in motion long before Sprint stepped in. Nextel is vacating spectrum that it promised not to use because it was interfering with Public Safety radios in the 800MHz band. As it vacates, existing Nextel users are getting crammed into a smaller band, and quality is suffering. The only cure is to speed up the rollout of EV-DO Rev.A, and get Nextel users migrated to PTT services over CDMA. Sprint is showing every sign of doing this, so is there any executive culpability? Perhaps the Nextel merger was simply ill-conceived, and overpriced.
- Investors are not thrilled about Xohm, Sprint's big venture into
WiMAX service at 2.5GHz.
My take: This is a serious fundamental disconnect between investors and management. The Xohm effort is something I earlier described as follows: "Sprint's 2.5GHz strategy is tied in my mind for "gutsiest US telco project" with Verizon's FIOS project. If Sprint succeeds, they will have a sustainable advantage that their competitors cannot easily copy (for lack of spectrum)."
The disconnect is that investors in Sprint are risk-averse, Blue-chip, dividend seekers. They invested in Sprint when it was a utility company. But Sprint's "gambit" into WiMAX has taken them way out of the "utility company" comfort zone -- and the reaction of the investors is as expected. With Xohm, Sprint's risk profile is looking more and more like a big tech firm, say Yahoo or Apple. Today's Sprint needs risk-seeking investors, not fixed-income seekers. Of course, the result is that Sprint is churning investors faster than it churns subscribers. And it's easier to lose old investors than to gather new ones.
Perhaps existing investors would rather see Sprint sell off its 2500MHz spectrum to some VC, private equity-backed group that could take the risk, and pay a dividend to shareholders. But that doesn't make sense. It's exciting to finally see a telco do something bold, take risks, and...yes...even get a bit desperate. Because it is in desperation that the telco will break ranks and do radical things, like give the customer what it wants. Xohm promises no long contracts, open-access to any compatible device, ample bandwidth, and reasonable and varied pricing plans. Damn, does that sound like a breath of fresh air! Techdirt is firmly in the camp that so doing, a telco would actually INCREASE the value of their products, and grow profits.