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Sprint Nextel is in for a massive overhaul.
The nation’s third-largest wireless carrier will finally rid itself of the Nextel albatross — both the service and the name — by the end of the first half of the year. It will merge with SoftBank, giving it access to cash to speed its network deployment. It will also acquire full control of Clearwire, giving the company the best spectrum position in the nation, according to one industry official.
The changes represent a massive identity shift for Sprint, and one that brings hope and optimism to the company and its leadership. Sprint, which has long struggled to juggle both networks while attempting to turn around several quarters of losses and customer defections, may finally be turning a corner with the big changes set to take effect in the coming months.
“We’ll exit 2013 on a strong basis once you get past the first half when all the noise is cleared,” said Chief Financial Officer Joe Euteneuer, his excitement about getting past the next few months evident in an interview with CNET.
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Once Sprint merges with a holding company formed by SoftBank, the resulting company will be known only as Sprint, finally dropping the Nextel name that has hung around the business like a stench that just wouldn’t go away.
The Sprint Nextel name was part of the merger of equals that combined the two wireless companies — now regarded as one of the worst deals in the history of the industry. Right off the bat, the executives at the time demonstrated a lack of focus and execution in running the networks, allowing the once-vaunted Nextel service to deteriorate and spur an exodus that the company never really got over.
Sprint reported today more than 1 million customers from the Nextel side of the business left the service in the fourth quarter. The company, however, was able to recapture about half those subscribers and move them over to Sprint.
Sprint has been focusing a lot of its marketing dollars and efforts on bringing back customers lost on the Nextel side, but Euteneuer warned that the rate would fall to 30 percent to 40 percent in the coming months as the company lets some of the less profitable customers go.
Once the Nextel network is shut down, Sprint will only have to focus on its core service and continued network upgrade plans. Euteneuer said that much of those marketing dollars would be repurposed and used to go after organic growth. Once Nextel’s network is shut down, the numbers should start to look better, with Sprint having added 683,000 customers in the fourth quarter, though that was more than offset by the losses at Nextel.
“Sprint has had consecutive growth over the last eight quarters,” Euteneuer said. “With Nextel gone, you’ll actually be able to see that.”
A more focused Sprint will hopefully mean a more competitive carrier. The company has let AT&T and Verizon Wireless widen their respective leads, with Verizon in particular running away from the competition with its 4G LTE network.
Sprint CEO Dan Hesse acknowledged that there had been delays and issues with the 4G LTE rollout last year, but said the company is working hard to catch up. Euteneuer said most of those issues, which included equipment inventory shortages, delays with permits, and the timing of getting backhaul services in place, have been resolved.
Of course, Sprint is refocusing itself just as the wireless industry is beginning to mature. In particular, the bread-and-butter business of smartphones and contract services are starting to see slowing growth.
“Clearly, the smartphone market is maturing, as 80 percent-plus of postpaid phones being sold now are smartphones and an increasing number of prepaid phones, as well,” said Tavis McCourt, an analyst at Raymond James. “We expect 2013 smartphone growth in the U.S. to be up about 5 percent or so and, again, to be skewed towards the next iPhone launch quarter.”
AT&T and Verizon are already pushing to get other devices connected, and Sprint will have to do the same. T-Mobile, meanwhile, is looking for a turnaround of its own, and has promised to get aggressive to achieve its goals.
It’s a big challenge for Sprint, but fortunately the carrier will be a lot nimbler and better financed in the coming months.
