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Greetings from Charlotte, North Carolina (Uptown signpost pictured). We will attempt to answer the question “Do the state Attorneys General have a case?” by summarizing and analyzing their case (find a copy of the complaint here – see point 7).
Following the ebullience of DOJ approval and a very strong earnings report from T-Mobile, investors digested Verizon’s (generally strong for wireless, and weak relative to AT&T for wireline) and Sprint’s (generally weak, Free Cash Flow negative) earnings. We will weave some recent earnings results into this week’s TSB, but, if you want all the details and analysis, look to the Deeper post we will have on the website related to “State Attorneys General Make Their Case”
Let’s dig into the basics of the case by understanding the plaintiffs, the nature of the complaint, and possible remedies/ compromises.
Who is Suing?
For those of you who are not following recent events closely, fourteen states and the District of Columbia are filing suit to permanently block the merger of T-Mobile and Sprint. Those states are as follows:
There is a very good balance of incumbent telcos represented by the suing states and DC. In fact, outside of Texas (let no one forget it’s the HQ of AT&T), there’s really no representation of the former Bell South or Southwestern Bell territories. It is interesting that 11 out of the 15 states or territories have a population density that is higher than the national average (the promise of rural buildout is less attractive in these areas than in Kansas, Nebraska, Wyoming, Oklahoma or the Dakotas). And there are some notable dense areas that are missing: New Jersey, Rhode Island, Delaware and Florida all have high population densities but have not joined the group. Florida and New Jersey split cable coverage between Comcast and Spectrum.
While the plaintiffs in the lawsuit make an argument that competition will raise prices and reduce choices for lower-income Americans, it’s interesting to note that 11 out of the 15 states have high median household income (with 7 of the top 10 household income states represented). In fact, 12 out of the lowest 13 per household income states are not party to the complaint.
The head-scratcher on this list is Colorado, home to Dish (admittedly not as much in the picture when the lawsuit was filed in mid-June) and a relatively less dense area. But it also happens to be home to a significant and growing base of Comcast, Spectrum, and CableLabs employees and is one of the fastest growing states in the country. And, as the nearby chart shows, Colorado has a Democrat Attorney General (profile here).
What isn’t a surprise is that 11 out of 15 states have a strong Comcast presence. Admittedly, Comcast is pretty much everywhere (see map from Broadband Now here), and Illinois
(Comcast is primary provider to Chicago), Washington (Seattle, Tacoma), Georgia (Atlanta), Florida (Miami) and Pennsylvania (Comcast’s home state as well as provider in Philadelphia and Pittsburgh) are not currently represented in the legal action. But if we see others join the lawsuit next week, don’t be surprised if they are one of the five mentioned above (Washington would be a particular blow to T-Mobile whose HQ are in Bellevue).
Bottom line: There are 26 states with a Democrat Attorney General, and half of them have joined together to block the T-Mobile/ Sprint merger. The one Republican state that recently joined the lawsuit happens to be home to T-Mobile’s former proposed merger partner and current competitor, AT&T. While there is no clear pattern beyond political affiliation, it is interesting to note that Comcast/ Xfinity Mobile has a major presence in many of the suing states.
What’s Their Case?
The case is best summed up in the last section (104) of the complaint: “Unless enjoined, the Merger likely will have the following effects in retail mobile wireless telecommunications services across the nation, among others:
- “Actual and potential competition between Sprint and T-Mobile will be eliminated;
- “Competition in retail mobile wireless telecommunications will be lessened substantially;
- “Prices for retail mobile wireless telecommunications services are likely to be higher than they otherwise would be;
- “The quality and quantity of mobile wireless telecommunications services are likely to be less than they otherwise would; and
- “Innovation will likely be reduced.”
Simply put, the telecom marketplace is better off with the current four-company structure, warts and all, then it would be with a three-company structure and Dish as a new entrant (with Sprint’s 800 MHz spectrum). The complaint contends that prices would rise 17-20% as the new T-Mobile would exercise their dominant position in major metropolitan areas such as New York and Los Angeles to keep prices (particularly prepaid) high. It also contends that fewer MVNOs would emerge and current MVNOs like Tracfone/ Straight Talk (20 million total customers) would struggle because neither the new T-Mobile nor Dish would make 4G or 5G capacity available at attractive prices. Finally, they contend that the consequences for the new T-Mobile failing to fulfill their deployment promises to the FCC are too weak.
While the actual market shares are redacted in the complaint, the Herfindahl Index information and the disclosure that the new T-Mobile would have more than 50% market share in the New York and Los Angeles CMAs (see sections 48 and 49 in the complaint) is astounding (full map of the FCC CMAs and RSAs here). CMA 1 and 2 are not small geographic areas, and, as we discussed last week, Dish owns some additional 600 MHz spectrum covering CMA 1. The greater question is “If true, what have AT&T and Verizon been doing in these markets for the last seven years? Have they been retreating to the Connecticut and New Jersey suburbs (as Long Island is covered by CMA 1)?” The disclosure is damning to Verizon and AT&T as it represents their two largest facilities-based (incumbent telco) footprints.
As for the argument that low-income subscribers would be disproportionately impacted, let’s have a look at the map of “mobile phone shops” in Paterson, NJ (I had the opportunity to tour every one of these and a few more as a part of my MVNO education in 2017). As you can see from the nearby picture, there are 17 stores within a 12 square block radius selling every major carrier. There’s a Boost City and two Boost Mobile stores. There’s a Total Wireless (Tracfone MVNO served exclusively by Verizon) and AT&T, Verizon FiOS, T-Mobile and Sprint retail stores in the mall at the bottom of the picture. There are traditional bodega-style shops selling H2O (AT&T MVNO), Ready Mobile (Tracfone MVNO served by T-Mobile), Ultra Mobile (T-Mobile MVNO) and several other brands.
Competition would suffer if T-Mobile eliminated their MVNO business entirely, but there’s absolutely no indication that they would ever throw Tracfone to the curb (their recent earnings call language backs it up). But if they did, AT&T (Cricket) and Verizon (Total Wireless, Xfinity Mobile, Spectrum Mobile) would gladly take their customers.
If space permitted, there’s an argument to be made that if Apple’s new credit card is successful (see latest Bloomberg article here), the concept of device financing through a traditional carrier will be a thing of the past in several years and we will be ordering iPhones with Mint Mobile-like online plans. Traditional carrier stores will go the way of bank branches (minus the need for an ATM).
Bottom line: The case sounds strong, but there’s plenty of contrary evidence indicating that the new T-Mobile would not behave like AT&T and Verizon just because it is bigger. The Herfindahl Index results highlight the metro retreat of the larger established brands more than the growing domination of their smaller rivals.
Let’s Make a Deal!
If a settlement can be achieved, it could include the following:
- Additional wireless subscriber divestitures in high-concentration markets to Dish. That’s a “sleeves off the vest” give on the part of new T-Mobile if they believe that they can win those customers back (T-Mobile’s postpaid monthly phone churn was extremely low this quarter at 0.78%). It may be easier to divest existing Sprint subscribers.
- Force a better MVNO deal for Dish (which would likely delay their construction of a replacement network).
- Mandate “cost plus” roaming rates T-Mobile offers to other carriers who wish to use the new T-Mobile network in rural areas (another “sleeves off the vest” argument which would improve scale for T-Mobile).
- Accelerate the Dish network deployment timeline (which would need to happen separately as Dish is not a party to the state Attorney’s General complaint) with additional penalties for non-compliance.
- Providing Dish (or near-Dish) terms to any new or existing MVNO that wishes to use the new T-Mobile network for the next 7 years (including the ability for any MVNO to exercise core control as outlined in the complaint). This would increase T-Mobile’s overall scale but not improve Dish’s overall competitiveness.
- Significantly higher penalties should T-Mobile not comply with the FCC conditions.
- Additional commitments (including cash payments) to the states. These might include requiring all new devices sold by new T-Mobile to be compatible with all other carriers, establishing a neutral-party run device compatibility database that would allow current and prospective customers to determine whether their current device could deliver a better network experience, and tools to make it easier to bring all text messages and voicemails to carriers should the customer leave the new T-Mobile.
Rather than focusing on the higher market share that the new T-Mobile will have (which has changed dramatically since 2012), the Attorneys General should focus on how to provide incentives to Verizon and AT&T to reestablish their presence in urban areas.
Bottom line: There’s a deal to be made. Rather than run the court through 5G cost models and timelines, the new T-Mobile executives and state officials should create a framework which will result in greater citywide competition and hasten the deployment of tomorrow’s network.
Next week’s issue will summarize 2Q earnings and look at Verizon’s new unlimited pricing plans. If you would like a copy of either the Top 10 Trends or the IoT Basic presentation discussed in last week’s TSB, please let us know at the email below and we’ll get you a copy.
Until then, if you have friends who would like to be on the email distribution, please have them send an email to email@example.com and will include them on the list.
Have a terrific week!
** Editor’s Note: This was originally sent to SB readers on June 22, 2014 **
June greetings from Dallas, where, as the picture shows, we are enjoying needed rain. Thanks for the many comments on last week’s column. Many of you shared your experiences with Google Fiber (those of you who have it in Kansas City don’t appear to be going back to cable or U-Verse in the near future), while others accused me of oversimpifying in-building wireless efforts (admittedly, I did leave the concept of obtaining Building Authorization Agreements out of the Brief. They are hard to get and involve specialized real estate/ legal expertise). Thanks for your readership, and please keep the comments coming!
Over the past two weeks, we have written about major changes in the telecom industry, including:
- The half trillion dollar value and multi-hundred billion dollar capital shift from network to software providers
- The threat of Google as a new entrant to the residential and small business markets
- Fundamental architecture changes that will take place as content is pushed to the edge
- In-building data capacity needs will accelerate fibered metro building deployments (which drove Level3 to offer to buy tw telecom this week for 12.5x EBITDA).
The last three points are “take it to the bank” certainties that will impact some parts of the telecommunications industry more than others. Amid the hype, remember this: If one carrier can deliver consistent experiences while outside, en route, near building, and in-building, all of the other carriers will need to follow suit. The top three carriers (Verizon, AT&T, and Sprint) are driven to do this because most of their current data pricing plans are capped. Not only is third-party Wi-Fi offloading viewed as inferior and inconsistent when compared to the increasing affordability of in-building small cell solutions, in-building Wi-Fi now has become a revenue threat to the carriers.
There are many drivers of change in the wireless industry, but four deserve special mention:
- The ripples of T-Mobile’s Uncarrier strategy are beginning to be seen throughout the industry. First, it was the introduction of Equipment Installment Plans (EIP), and the separation it has driven between equipment sale and service revenue quality. As AT&T, Verizon, and Sprint transition their bases from traditional subsidy (which, at the end of the two-year term and beyond, can have attractive economics) to EIP models, the pressure on service revenues (particularly data ARPA/ ARPU growth) becomes greater. As we covered in Sunday Brief Q1 earnings reviews, the transition of T-Mobile’s base will be nearly complete by the end of 2014.
The most important thing to remember with these shifts, however, is the increased flexibility it provides the incumbent providers’ base of customers. Under the traditional $325-350 subsidy model termination penalty scheme, the perception among the base was that they were “locked” until the end of the two years. None of the new plans carry two-year contract terms, and, as Sprint and T-Mobile have shown, they are willing to pay multi-hundred dollar termination fees to drive up gross additions . A more unstable base should have AT&T and Verizon on edge.
To add fuel to the fire, T-Mobile will launch a new program to the AT&T/ Verizon base this week. For a $700 hold on your credit
card, T-Mobile will send you a new iPhone 5s for a free one week test drive (I have confirmed with T-Mobile that the one week starts upon iPhone receipt – something to consider when you sign up). This is not a plan that is aimed at the traditional T-Mobile base, but one that gets current (Sprint/AT&T/Verizon) iPhone 5s users into a T-Mobile store to have a conversation. (If the customer is a current iPhone 4s user, they will receive a double benefit due to the 64bit processing and LTE capabilities inherent in the 5s – a very clever move on the part of T-Mobile).
Will this plan have the same effect as equalizing the cost of an Android Wi-Fi only tablet? Likely not. But it could erase perceptions of poor network coverage for some. While many see this move as more “Carrier” than “Uncarrier”, I see this as Part 1 of a multi-part plan to reintroduce the T-Mobile network (voice, text, data) to millions of skeptical AT&T and Verizon customers (some of whom may have previously been T-Mobile customers). At worst, this program will provide real-time feedback on their network improvements and identify coverage gaps (and hopefully reiterate the need to begin a substantial in-building coverage initiative for T-Mobile hopefuls who are captive to multi-story living/ working environments). At best, it will propel 2-3 million gross additions through the end of 2014.
- The drive for spectrum outside of the FCC auction process will continue. There have been a lot of discussions this week about Verizon’s interest in Dish network spectrum (this article places a $17 billion value on the asset, and it’s very likely that Verizon’s interest is focused on Dish’s AWS-4 holdings as opposed to the 700MHz spectrum band), and also T-Mobile’s interest in acquiring additional 700 MHz A-Block (a.k.a., “low band”) spectrum from the likes of Paul Allen’s Vulcan Ventures (who holds the Seattle and Portland licenses) and spectrum management companies King Street LLC and Cavalier Wireless (the full list of original A-Block winners can be found here).
We have already seen AT&T actively pursuing spectrum purchases since 2012 in the 2.3 GHz/ WCS band (see here for their Sprint spectrum purchase that escaped most media headlines), and this week Sprint announced their first wave of rural partnerships which will leverage their Tri-Band capabilities.
With the frequency-sharing rules of the upcoming AWS-3 auction, and the “reserved/ unreserved” designation for the 600 MHz auction discussed in a previous Sunday Brief, is anyone surprised that unrestrained and adjacent spectrum would be interesting to larger carriers? Absolutely not. Announcements serve to entice more broadcasters to participate in the 600 MHz auction process, and hopefully keep additional regulations to a minimum.
Interestingly, if there are a wave of spectrum sale transactions prior to the end of the year, look for new categories of bidders (e.g., non-traditional wireless providers) to emerge for the licensed spectrum.
- Consolidation efforts will fail, not because of Sprint’s lackluster efforts, but because of T-Mobile’s unbelievable success. In second quarter earnings, we will see the full fruits of T-Mobile’s Early Termination Fee buyout initiative announced in January. Surprisingly to most (although not all), T-Mobile’s results will equally impact Sprint and AT&T (given the process ease of SIM-card swapping between AT&T and T-Mobile, this might be viewed as a slight victory for AT&T).
As we have shown in previous Sunday Briefs (see picture), the retail postpaid gap between T-Mobile and Sprint is shrinking (if one exists in retail prepaid after 2014 I’ll be very surprised). The eleven million subscriber gap at the beginning of 2013 could be as small as four million as we exit 2014. And, considering the composition of T-Mobile’s (smartphones) vs. Sprint’s (tablet) net additions, the revenue gap will be even smaller.
While there will be many traditional regulatory concerns (link to the Herfindahl index definition is here), the trends beg the question “Why should T-Mobile take on Sprint?” Does Sprint’s base of customers provide unique differentiation (and, given a large portion of the base is still on unlimited and unthrottled LTE data plans, can the value of the customer base increase)? Does Sprint’s base allow T-Mobile to build unique capabilities in the enterprise segment (which Sprint largely abandoned in 2013 to focus on small and medium customers)? Can Sprint out-innovate T-Mobile with a new management team (or, as one of you wrote recently, “Where is the Sprint problem – with the quality of the clay or with the potter?”).
Time is not on Sprint’s side: Service revenues are shrinking, management is leaving, and customers (particularly Corporate Liable enterprise customers) are questioning. No doubt, there is a value to scale, but T-Mobile is worth much more than $40/ share in a couple of years without Sprint. Could a cash infusion from Comcast/ Time Warner or a cable consortium be a viable alternative? Does T-Mobile even need cable as a strategic investor?
Consolidation makes good headlines, but every month that goes by without an announcement opens up better alternatives for T-Mobile than Sprint (and makes the “Why?” question more difficult to answer). Remember – at the beginning of 2006, Sprint Nextel, AT&T Wireless, and Verizon were basically the same size. One non-traditional strategic partner/ investor could reset the equation for T-Mobile and the industry.
4. The cable industry (as opposed to FiOS or U-Verse) will unveil Wi-Fi capabilities in 2015 that will be easier to use and intensify the battle for data in the home and office. The blind spot in wireless carrier strategic plans is cable. Their Wi-Fi efforts are very close to tackling the issue of in-home (and in-office) data usage. The rollout of an additional 100MHz of 5GHz Wi-Fi capacity will also fuel the bandwidth fire. More to come on this in a future Sunday Brief, but, given the arguments presented above and in previous analyses, cable would easily eliminate 10-20% of the data upside from the wireless carriers in 2015. (Editor’s note: for a view of the extra expansion from the cable industry’s point of view, check out this CableLabs blog post).
These are a few of the issues wireless service providers face, but they cover nearly every aspect of the business environment: non-traditional competitors presenting real substitutes, traditional competitors redefining the buying process, increases in supply, new regulations, and the increasing sophistication of smartphones and tablets are but a few of the dynamics that will be discussed around the strategic planning table. Who wins is anyone’s guess. But every carrier will attempt to move the needle.
In other important news this week, we do not have space to do a full analysis of the new Amazon smartphone (we will try to tackle the new Fire Phone in depth next week). In the meantime, check out two in-depth reviews here and here, and an excellent interview with Ian Freed from Amazon here.
Have a terrific week!
Greetings from Lawrence (KS) – pictured, Kansas City, and Dallas. It’s been a busy week in the telecom world, with continued speculation about potential cable marriages (the latest on Friday was a combination of privately-held Cox Communications and Charter), robust cable earnings from Comcast, an entire network shut down as CBS and Time Warner continue their dispute, and the Obama administration’s intervention to overturn an International Trade Commission ban on certain older (3G) Apple products that was the subject of a lengthy lawsuit with Samsung. Our industry is dynamic and multi-faceted, driven by speed to market. We wouldn’t have it any other way.
Against this backdrop, Sprint announced earnings on Tuesday and, after a day or two of absorbing the earnings picture, Sprint’s stock rose 10%. Since issuing post-Softbank shares (July 11 was the first full trading day – Sprint closed at $6.28), Sprint has performed better than T-Mobile USA, who will announce earnings this week.
What is motivating the resurgence in Sprint interest? Here are several thoughts from discussions with many of you as well as a quick scan of recent earnings analysis:
- Nextel, the “gift that keeps on giving” according to Sprint CEO Dan Hesse, is largely behind Sprint. Admittedly, there remain several quarters of T-1 removals and Sprint warned, particularly in the third quarter, of continued losses in enterprise subscribers as a result of re-bid processes related to the iDEN shutdown. (Note: This buys a few hundred thousand more enterprise postpaid retail subscribers in 3Q for AT&T and Verizon).
- Sprint has a plan for Clearwire’s 2.5 GHz spectrum and it is aggressive. New handsets that utilize the 2.5 GHz spectrum will be launched throughout 2014, and large-scale deployment in urban areas to deliver “comparable speeds” to others in those markets are underway. I was very surprised at how little Sprint talked about Clearwire’s current operations as they are a $1.3 billion revenue-generating entity, with ~1.5 million retail customers (Q1 figure) and $800 million in retail annualized revenue (also Q1). More on this in a future column, but Clearwire’s retail base might not be as easy to disconnect as one might think.
- Sprint has a strong understanding of the dynamics affecting the prepaid retail market and will recover by the third quarter. As we discussed, in the second quarter (and particularly in the latter half of the quarter) Virgin Mobile offered significant discounts on iPhone devices to drive up gross additions. In fact, we noted that in some cases, Virgin Mobile’s new phone pricing was better then AT&T’s All In One (AIO) refurbished device pricing (this anomaly continues today with VM offering a new 8GB iPhone4 for $297.49 and AT&T offering a refurbished iPhone4 for $349.99). Virgin Mobile is also offering the iPhone5 16GB model for $549.99.
- As a result of good financial management and the Nextel network shutdown, margins will recover. It’s hard to make the case that margins have recovered, as they are still in the 17-18% level (compare to T-Mobile’s Q1 adjusted EBITDA level of 29%). But, even a recovery to 23% would mean $600-650 million in additional bottom line return, while a recovery to T-Mobile’s level would mean $1.2–1.3 billion in additional annual profitability. These changes do not happen overnight, but some analysts have argued that the shutdown of the Nextel network will yield additional incremental savings of $400 million within the next two years. I don’t see that much, but do see at least $120 million in annual access savings (20,000 iDEN towers; 2 T-1 circuits per tower, $250 per T-1 per month).
The allure of Sprint’s recovery story, especially against the backdrop of Verizon and AT&T, is music to the ears of many Sprint shareholders who remember a double-digit share price just a few years ago. However, as Sprint noted on the call, competition continues to be intense. Here’s a short list of the headwinds Sprint faces:
- Post iDEN retention efforts are just the tip of Sprint’s Business problem. Sprint cannot afford to lose additional business revenues, yet they are behind on LTE POPs covered, in-building coverage, and data center/ cloud solutions. As business environments move away from corporate-owned to employee-owned/ corporate-reimbursed devices, the size of their in-building coverage need grows. Like their larger peers, Sprint has moved to a metered plan for business customers, and, as such, has an interest in growing (as opposed to offloading) revenues in these buildings.
Solving building/ floor level issues is Sprint’s Achilles heel. It also happens to be an area of expertise for Verizon and AT&T, particularly where they are the incumbent wireline provider. Relieving the pressure on the macro data network through in-building solutions is critical to spectrum optimization, customer satisfaction, and cost management. It is not an optional strategy if Sprint wants to maintain their disproportionately high enterprise market share.
On top of this, cloud-based solutions (such as Desktop as a Service) are driving greater integration between office sites, remote servers, and wireless tablets/ phones. Both Verizon and AT&T have the strategic pieces to assemble robust end-to-end service level agreements (Mean Time to Repair/ Fix, granular network reporting, applications monitoring and management).
Without computing and connectivity partners, Sprint will struggle to gain market share leadership in the enterprise space. They will continue to struggle with connected device net additions (which were down 16,000 for the second quarter). They will see more cable, Verizon, and AT&T in-region competition in the small business space. They may even lose a partner because T-Mobile beats them to the punch. Restoring the enterprise luster takes a lot of elbow grease and a lot of time – Sprint needs to apply the “enterprise polish” very liberally to remain relevant.
2. After Sprint completes 200 million LTE POPs, how do they get to 250/ 275/ 300 million? When Sprint’s two larger competitors have completed or are near completion of 275-300 million LTE POPs covered, and T-Mobile has already announced a 200 million year-end POP coverage goal, how does Sprint respond? Answering this question reveals how dependent Sprint is on Verizon (ALLTEL) for much of its non-metro/ non-highway coverage. Here’s a good example of the difference in coverage between Sprint and Verizon:
From this picture, Sprint’s coverage is strong in the greater Atlanta metroplex (call it a 20-40 mile radius around metro Atlanta).
It isn’t hard to see the effect of different capital spending levels (over many years) when you look at these charts. Verizon Wireless has spent $16.7 billion over the past eight quarters building out their LTE network and maintaining their legacy networks. Sprint has spent $6.6 billion over the same period. That’s $2.53 in Verizon spending for every dollar Sprint spent. This ratio has largely held at a 2.5 level since 2008, resulting in a $24 billion difference in capital spending between Verizon Wireless and Sprint (I included all of Sprint’s capital spending in the above calculation. The gap would be even wider if Sprint’s wireline capital expenditures were removed, but we would need to include some Clearwire capital expenditures as an offset).
Sprint (and T-Mobile) cannot compete without filling in the “white spaces.” The Clearwire spectrum will be very valuable in metro areas, but Sprint could start today with their existing 1900MHz and 800MHz spectrum in these regions. The best way Sprint could win against AT&T and Verizon is to partner with T-Mobile on attacking the “breadth issue.” A cooperative effort might allow both companies to reach an additional 50-60 million POPs.
3. Sprint has new owners, but more debt than before. Previously, this was defined as a payment issue for Sprint, and quarter after quarter Sprint had to reassure jittery bond holders that they would not default on their debt. Sprint is far from these levels, and, as noted on the conference call, has seen their debt rating raised since the Softbank transaction closed.
However, prior to Clearwire, Sprint has done very well managing their balance sheet. Here’s a snapshot from the quarterly presentation deck:
At the end of the second quarter, Sprint had $17.8 billion in net debt. Per the chart above, Sprint used $1.3 billion of cash since June 30 and added $0.8 billion in debt. Sprint’s $20 billion in net debt compares to $9.7 billion in net debt announced by Verizon Wireless on their earnings call.
More debt reduces flexibility. Verizon has options to expand in Canada – Sprint will likely pass on bidding for assets or spectrum. Verizon has the opportunity to expand globally, perhaps through an acquisition of Vodaphone. Sprint has to clean up Clearwire’s money-losing retail operation and decommission the Wi-Max network — a drag on earnings for several quarters. Verizon can focus on investments such as Home Fusion to bring LTE to less populated areas at economical scale.
Sprint needs to invest if they want to gain market share. Their position is the best it has been in seven years, but Verizon and AT&T have also dramatically improved their balance sheets. To win, Sprint will need to think differently – find the formula to restore the luster to their enterprise jewel, find the right partnerships to match Verizon and AT&T capabilities especially in well-populated but not urban areas, and execute flawlessly with their current capital resources.
There is a lot of blocking and tackling ahead for Sprint. Moving from survival to leadership mode is not an easy thing to do. But Sprint has surprised many before, and, thanks to Softbank, has the opportunity to prove them wrong again. There’s a lot of buffing needed to remove layers of tarnish and restore the luster of 2005.
Next week, we’ll focus on wireline and cable earnings. Until then, if you have friends who would like to be added to this email blog (over 100 in the past two months have been added), please have them drop a quick note to firstname.lastname@example.org and we’ll add them to the following week’s issue. Have a terrific week!