Sprint

Sprint & WiMAX partners to invest more in technology development

Sprint and others in the WiMAX partnership have agreed to contribute more money to the 4G wireless technology despite the view by some that WiMAX is the poor stepchild of 4G and that LTE is the anointed. The problem is that they have fallen into a nomenclature trap. 4G technologies are alike in that they’re the generation after 3G, but WiMAX and LTE are in different families, and in truth are not likely to be very competitive.

WiMAX is aimed at migratory users who operate from a small number of fixed locations in some random sequence—hence our name for the group and the behavior. LTE is a successor to 3G mobile service, largely aimed at a mobile or at least a regularly moving population. The preferred LTE instrument is the smartphone; for WiMAX, it’s the tablet or the netbook.

We think Sprint and its allies are on to something here. Wireless behavior is constrained by its device support, and little devices are not great vehicles with which to view content or even web pages. Yes, there will be many iPhone and Android lovers who will use their mobile devices from fixed locations, but we think a large number of users will adopt a larger device designed for sedentary applications in cafes and other locations.

There’s still plenty of time (and ways) to mess this up, but we think Sprint could redeem its position with WiMAX. In fact, it’s the only way it can do that. Sprint is cutting its workforce, which hardly speaks favorably about its prospects with normal cellular services.

NSN professional services a plus for carrier procurement zone strategy

The head of NSN’s North America operation said the company would be an LTE leader in North America, and said it rather emphatically, to be sure. The comments came at NSN’s analyst event this week, which was a parade of optimism on NSN’s prospects in the market, not only in North America but elsewhere.

NSN’s greatest strength is its professional services business, and second on the list comes its credibility with operators in multi-vendor integration. The company also has a strong service-layer story, though that story is built on tools used by its consulting and professional services staff to create one-off solutions for operators and not productized (at least for now).

The value of professionals services in the U.S. today is based on the procurement zone trend, already formally in place at AT&T, and in process (we’re told) at both Verizon and Qwest, and being considered even by Sprint. This program creates what’s effectively a mandatory systems integration position in each zone, which in turn means that those with strong capabilities in that area can expect to get a prime vendor position.

DT and Sprint: Acquisition in the making?

There are financial rumors that DT is looking to buy Sprint, whichwas enough to send DTs stock down in Europe today. DT is said to be looking to boost its T-Mobile brand in the U.S., which is number 4 in terms of wireless providers, and to get access to spectrum and the cable MSO deals Sprint has.

There are still questions about Sprint’s viability, which is what has German markets upset. We think this might be at least the beginnings of a good deal, although how it would fare with regulators is much harder to predict. T-Mobile and Sprint are both too small to be effective competitors, but any loss of market players might spook both the FCC and the FTC.

Outsourcing operations trend appeals to carriers, too

Sprint is outsourcing its network operationst o Ericsson, the latest player in a series who have taken this sort of step. Alcatel-Lucent has been the beneficiary of most of these deals recently. One might think the whole of the carrier space is outsourcing network operations, but that’s an oversimplification.

Verizon, for example, says it has no plans for network oursourcing. Most of these deals are for pure “NOC” or operations center outsourcing. For some providers, like wireless carriers, that may be a big chunk of total network operations costs, but for access providers, the physical outside plant maintenance part is the great majority. Therefore, everybody doesn’t save a bundle with this kind of deal. Second, the operators tell us these deals are really seen internally as a kind of extended network integration process.

Operators are finding it harder to acquire and retain skilled network personnel and are concerned about the burdens of moving into new technology areas. In modernization and network enhancement projects they’re turning increasingly to integration deals, and these are extending into ongoing operations. Ericsson is likely hoping to use Sprint to develop some U.S. economy of scale in its outsource operation.

Network outsourcing trend grows from operations economics

Sprint is rumored to be looking at outsourcing its network management/operations to Ericsson, another data point in the growing number of management outsource deals. While there are certainly some potential savings involved in this sort of thing, we believe it’s actually pretty clear that savings per se are not the driver.

Sprint and other large operators are more than large enough to reach full operations economies of scale internally with the right tools and support. The problem is they don’t have that, and there’s no prospect of such tools arriving on the scene because of logjams in the standards processes. The outsourcing trend, in our view, is the result of long-standing operator angst about escalating operations costs and risk, and the lack of any systematic vendor support for new options to hold down costs.

By negotiating a deal with an outsourcer, operators can let the outsourcer do what’s needed, defying standards and other factors. In the long run, this may create an enormous advantage for vendors like Alcatel-Lucent, Ericsson, and NSN, which have large and successful outsourcing businesses. After all, while outsourcers don’t dictate network purchases, they are certainly in a position to influence them.

Sprint layoffs are cautionary ARPU tale

Sprint is a poster child for the “Value of ARPU.”

Consumer telephony is enormously impacted by the cost of customer acquisition and the reduction of churn, and a lot of “costs” are more related to sustaining the relationship than to providing services.  In that situation, it pays to have a lot of arrows in the quiver to mine revenue from each relationship.

When the other interexchange carriers (IXCs) got bought, Sprint was left on the table with no local exchange wireline business, which left it only wireless.  Every customer it loses means a special marketing effort is needed to reach out to restore, where AT&T and Verizon can mine their bases with every bill they send out, at no incremental cost.

Sprint was slow to realize it had a special advantage in being mobile-focused, as well as the special risk of ARPU management and the associated challenges with churn.  They didn’t address the issues, and buying Nextel just diverted them and increased the base of mobile-only customers, which increased all these risks.

SK Telecom sniffs around Sprint

The low dollar may be contributing to interest in Sprint by SK Telecom, though many international operators have eyed acquisition as a means of entering the US market.

There isn’t much commentary on the deal, but we are hearing the SK Telecom may be betting that the WiMAX position in the US will be worth more than investors currently believe it will, and that the value of Sprint will therefore be higher.

There is no assurance that regulators would buy such a deal, even if Sprint were to agree. However, if the deal is even attempted it would likely show that Sprint’s board is concerned about the company’s future. Sprint continues to be dependent, in our view, on getting a lot of non-traditional devices onto WiMAX, and it is not likely that much progress can be made in this area until 2009, even with the backing of Intel.