Sprint Stumbles; Verizon, Cingular Gain

[TNDan21]

Sprint Stumbles; Verizon, Cingular Gain
Friday August 25, 3:48 pm ET
By Peter Svensson, AP Technology Writer

Wireless Carriers: Sprint Stumbles, As Verizon and Cingular Gain Share

NEW YORK (AP) -- Among national cell phone carriers, the recent theme has been: The big get bigger, while the smaller struggle.

The country's largest wireless carriers, Cingular Wireless and Verizon Wireless, are benefiting from their ownership by telephone giants, which gives marketing reach and the convenience of combined home and mobile phone bills for customers.

Meanwhile, Sprint Nextel Corp. and T-Mobile USA are scrambling to keep up.

Sprint, in particular, has had a spate of bad news. Three weeks ago, it reported a 38 percent drop in second-quarter profit. It added 708,000 customers in the quarter, less than half the number added at Cingular and Verizon.

Nextel, which Sprint acquired last summer, appeared to be almost dead weight -- it effectively has added no customers in the past year, according to Merrill Lynch analyst David Janazzo.

Janazzo says customers are complaining about Nextel's voice quality, which is suffering because of insufficient wireless bandwidth in some markets. He downgraded the investment rating on Sprint from "buy" to "neutral" this week.

Sprint's chief operating officer Len Lauer paid the price for the recent difficulties and left the company Monday. He will not be replaced, the company said.

As a result, Stanford Group analyst Michael Nelson is concerned that Sprint Chief Executive Gary Forsee is adding Lauer's duties to his own. "We remain skeptical to whether Sprint can effectively execute and turn around the business in the near term," Nelson wrote in a research report.

In the longer term, Sprint has two initiatives aimed at narrowing some of the advantages Cingular and Verizon Wireless enjoy by virtue of their corporate parents. (Cingular is owned by AT&T Inc. and BellSouth Corp., which are merging, and Verizon Wireless is owned by Verizon Communications Inc. and Vodafone Group PLC.)

Sprint announced this month it is betting on a new wireless technology called WiMax that would give customers fast Internet connections at home to compete with digital subscriber lines from the telephone companies.

WiMax is similar to Wi-Fi, the popular home-networking technology, but each "hotspot" would be miles wide. Theoretical maximum data speeds are high, but since many households would share the bandwidth, each one would in practice get a connection slower than DSL, analysts believe.

The other way to reach customers at their homes: partnering with the telephone companies' rivals, the cable companies. The country's four largest cable companies are planning to begin selling Sprint service later this year, giving them a wireless component to add to bundles of video, Internet and voice calling.

To gain wireless capacity for the new services, Sprint and the cable companies are partnering in bidding on wireless spectrum in an ongoing auction run by the Federal Communications Commission. Their bids have reached more than $2 billion in the auction, which has a total value of $13 billion so far.

The biggest bidder in the auction is T-Mobile, which has winning bids worth more than $4 billion. Analysts say T-Mobile badly needs the spectrum to introduce high-speed data services, where it's lagging behind the other three carriers.

"We believe that T-Mobile is the one major entity that must gain a substantial amount of spectrum across geographies because of its current limited spectrum," wrote Pacific Crest analysts James Faucette and Steve Clement.

Like Cingular and Verizon Wireless, T-Mobile is owned by a large telephone company, but it's too far away to provide the kind of support the other two are getting: T-Mobile's parent is Deutsche Telekom AG of Germany.

Analysts are generally positive on Cingular's prospects. It appears to be overcoming concerns about call quality raised by the 2004 acquisition of AT&T Wireless, which used a different technical standard than Cingular's phones.

Cingular's churn, or the number of customers canceling service, fell to 1.7 percent in the latest quarter from 1.9 percent. Analysts at Robert W. Baird recommend AT&T and BellSouth stock as a way to benefit from Cingular's growth. It now has 57.3 million cell-phone customers, a few more than Verizon Wireless.

Verizon Wireless, however, added 1.8 million customers in the second quarter, faster than any other carrier, and profits were up strongly.

However, only 55 percent of the wireless operations' profits flow to Verizon Communications -- the rest go to its partner Vodafone. Verizon has been eager to buy out the British company, but Vodafone put those hopes to rest in July -- it's one of the company's best overseas investments.

That means Verizon's results are more closely dependent on its wireline business than investors would like. An expensive and ambitious plan to replace its copper network with optical fiber has held down the company's stock since last year.

Alltel Corp. separated from its wireline business in July, leaving it as the country's fifth-largest wireless company, albeit one with regional rather than national coverage. It covers a wide band from Texas to Canada, and another from New Orleans to southeastern Virginia.

Robert W. Baird analysts recommend it as a pure-play wireless company, and note that it has a $3 billion share buyback under way.

Sprint Stumbles; Verizon, Cingular Gain

[Etorres777]

Wow, I didn't know Sprint was doing THAT bad..

[jones]

Originally Posted by Etorres777

Wow, I didn't know Sprint was doing THAT bad..

Sprint WIMAX is an Assault on CDMA Royalties.
http://startups.gigaom.com/2006/07/26/qualcomm/

[UFO]

I personally never understood why people always want to go with the big corporation. It seems somewhat un-American to me for people to flock to companies like Verizon (and Wal-Mart) while the smaller carriers (and other small businesses) continue to struggle. But then again, I just like the idea of a thriving small business which appears to be disappearing from America.

IN calling is a big bonus for a lot of people I guess. But I'll always be somebody that shops at the smaller, American-Owned companies!!

[chuikov]

Originally Posted by Etorres777

Wow, I didn't know Sprint was doing THAT bad..

Adding 700,000 customers isn't really terrible - it's just well below expectations.

Sprint/Nextel is confusing customers and has no clear direction. I've said it before and I'll say it now: They should market Sprint and Nextel seperately and invest in both networks. Right now, they are giving the perception that Nextel is a gonner. So potential new Nextel customers are shying away and old ones are switching to Verizon or Cingular instead of going with Sprint.

In my region, Nextel is very healthy, but Sprint/Nextel is in the strange situation of not owning the "Sprint" network (it's affiliate owned). The tail is kinda wagging the dog here, and Nextel is doing very well with new customers as well as network investment while the Sprint affiliate is doing less. Nextel is customer and facilities rich, but spectrum poor, while Sprint is the opposite...

I'm afraid Sprint is fixing stuff that ain't broke and canning stuff that can be fixed.

Here's a crazy idea: Transfer some Sprint spectrum for iDen use. Sprint has vast spectrum it's not really using, and Nextel is suffering because of a lack of spectrum.

duck/cover

[nKrypteD1]

Originally Posted by UFO

I personally never understood why people always want to go with the big corporation. It seems somewhat un-American to me for people to flock to companies like Verizon (and Wal-Mart) while the smaller carriers (and other small businesses) continue to struggle. But then again, I just like the idea of a thriving small business which appears to be disappearing from America.

IN calling is a big bonus for a lot of people I guess. But I'll always be somebody that shops at the smaller, American-Owned companies!!

Problem is, part of the american dream is to be happy and unfortunately happy in a capitalistic society is tied to money, people want cheaper services, cheaper products, ie. they go to large companies like wal-mart who, because of sheer volume, can offer better prices. There are also other factors, nationwide service and "network" calling being some that are also big factors.

[scotsboyuk]

Originally Posted by UFO

I personally never understood why people always want to go with the big corporation. It seems somewhat un-American to me for people to flock to companies like Verizon (and Wal-Mart) while the smaller carriers (and other small businesses) continue to struggle. But then again, I just like the idea of a thriving small business which appears to be disappearing from America.

IN calling is a big bonus for a lot of people I guess. But I'll always be somebody that shops at the smaller, American-Owned companies!!

The thing is that the bigger networks can offer more coverage and have more money to invest in their networks and services. A network that can offer seamless coverage across the country is an attractive propsect to anyone who travels to another city or even just somewhere close that a smaller network doesn't cover.

Larger networks also have an edge when it comes to implementing new services and offering new handsets. They have more money and customers to make such projects easier and more worthwhile. Thus customers can expect to see new services from the big networks first and be able to buy betetr handsets from them first.

[strunke]

Originally Posted by scotsboyuk

The thing is that the bigger networks can offer more coverage and have more money to invest in their networks and services. A network that can offer seamless coverage across the country is an attractive propsect to anyone who travels to another city or even just somewhere close that a smaller network doesn't cover.

Larger networks also have an edge when it comes to implementing new services and offering new handsets. They have more money and customers to make such projects easier and more worthwhile. Thus customers can expect to see new services from the big networks first and be able to buy betetr handsets from them first.

Good thing UFO and I have Alltel. It's the closest thing to a smaller corp, with all the perks of a big one. Just as good of coverage as VZW because of the agreements.

[scotsboyuk]

@strunke

Of course if a smaller network has roaming agreements it makes things easier, but I think my point is still valid.

[larry]

Originally Posted by chuikov

Adding 700,000 customers isn't really terrible - it's just well below expectations.

Sprint/Nextel is confusing customers and has no clear direction. I've said it before and I'll say it now: They should market Sprint and Nextel seperately and invest in both networks. Right now, they are giving the perception that Nextel is a gonner. So potential new Nextel customers are shying away and old ones are switching to Verizon or Cingular instead of going with Sprint.

In my region, Nextel is very healthy, but Sprint/Nextel is in the strange situation of not owning the "Sprint" network (it's affiliate owned). The tail is kinda wagging the dog here, and Nextel is doing very well with new customers as well as network investment while the Sprint affiliate is doing less. Nextel is customer and facilities rich, but spectrum poor, while Sprint is the opposite...

I'm afraid Sprint is fixing stuff that ain't broke and canning stuff that can be fixed.

Here's a crazy idea: Transfer some Sprint spectrum for iDen use. Sprint has vast spectrum it's not really using, and Nextel is suffering because of a lack of spectrum.

duck/cover

Sprint has bought most of their affiliates and Nextel Partners already. Only a couple of small affiliates remain. I'd like to see them scoop up IPCS (Horizon) who doesn't have a good reputation.

I also was disappointed in the delay of Sprint adding CDMA equipment to many Nextel cell sites where CDMA could use some better coverage/capacity. Many thought that Sprint was going to start doing this just 3 or 4 months after the merger was finalized. But here it is an entire year later with still no action on that. Sprint and Nextel are still working apart from each other to build seperate CDMA & IDEN cell sites and haven't really started doing anything together yet. It's baffling.

[Andy]

Originally Posted by scotsboyuk

@strunke

Of course if a smaller network has roaming agreements it makes things easier, but I think my point is still valid.

Actually even the 'big' networks would be out of luck in a ton of areas if they wouldn't have roaming agreements with other carriers...espcecially those smaller carriers like ALLTEL. It's a two-way street.

[UFO]

Originally Posted by scotsboyuk

The thing is that the bigger networks can offer more coverage and have more money to invest in their networks and services. A network that can offer seamless coverage across the country is an attractive propsect to anyone who travels to another city or even just somewhere close that a smaller network doesn't cover.

I see your point scotsboy, and it is valid. But VZW doesn't invest nearly all of their earnings back into their network. 45% goes overseas to Vodafone and the other 55% goes to Verizon which also owns landlines, DSL, Cable, etc. VZW benefits a lot from perception and roaming agreements as well and a lot of people don't understand that these "bigger networks" sometimes just really cover interstates and metro areas in some areas and rely on roaming through companies like Alltel for the rest of the coverage. There are a lot of people where I live that go with Verizon because they want "better traveling coverage." What the Flip, they don't understand, where I live, if they went with Alltel they'd have national coverage and they wouldn't have an unusable signal in many places while at home from a distant Verizon tower. But that's just in one place though I'm sure that thought process is everywhere where VZW competes with anybody. The more communications ventures that Verizon gets into, the more I think they are like "Globodyne." That science-fiction futuristic corporation that controls pretty much everything regarding communication.

Yeah, I'm just glad to be with Alltel so I do get seamless national coverage and the perks of a large company while I'm still supporting a smaller one in America! Roaming agreements do help too!

Edit:

Originally Posted by nKrypteD1

Problem is, part of the american dream is to be happy and unfortunately happy in a capitalistic society is tied to money, people want cheaper services, cheaper products, ie. they go to large companies like wal-mart who, because of sheer volume, can offer better prices. There are also other factors, nationwide service and "network" calling being some that are also big factors.

While this is true with Wal-Mart, it's usually not with Verizon or Cingular. Their plans are pretty much the most expensive with the fewest minutes

[chuikov]

Originally Posted by larry

Sprint has bought most of their affiliates and Nextel Partners already. Only a couple of small affiliates remain. I'd like to see them scoop up IPCS (Horizon) who doesn't have a good reputation.

I also was disappointed in the delay of Sprint adding CDMA equipment to many Nextel cell sites where CDMA could use some better coverage/capacity. Many thought that Sprint was going to start doing this just 3 or 4 months after the merger was finalized. But here it is an entire year later with still no action on that. Sprint and Nextel are still working apart from each other to build seperate CDMA & IDEN cell sites and haven't really started doing anything together yet. It's baffling.

Some progress is now being made to accomodate CDMA in new and future Nextel builds, but the slow additions of CDMA to the existing Nextel sites was inevitable.

I hope Sprint/Nextel gets it together. They have a good opportunity to expand both services instead of just confusing consumers.

[scotsboyuk]

Originally Posted by Andy84094

Actually even the 'big' networks would be out of luck in a ton of areas if they wouldn't have roaming agreements with other carriers...espcecially those smaller carriers like ALLTEL. It's a two-way street.

Point taken. However, I think the larger networks are in a better position to build a comprehensive national network, which would allow them to do away with domestic roaming agreements all together.

[scotsboyuk]

Originally Posted by UFO

I see your point scotsboy, and it is valid. But VZW doesn't invest nearly all of their earnings back into their network. 45% goes overseas to Vodafone and the other 55% goes to Verizon which also owns landlines, DSL, Cable, etc.

I see your point, but of course this is more to do with the fact that Verizon Wireless isn't a company in its own right, so to speak, but rather owned by two different companies. Both Verizon and Vodafone would no doubt love to be the sole owner, which would enable them to take Verizon Wireless (or Vodafone USA as the case may be) in the direction they want.

VZW benefits a lot from perception and roaming agreements as well and a lot of people don't understand that these "bigger networks" sometimes just really cover interstates and metro areas in some areas and rely on roaming through companies like Alltel for the rest of the coverage. There are a lot of people where I live that go with Verizon because they want "better traveling coverage." What the Flip, they don't understand, where I live, if they went with Alltel they'd have national coverage and they wouldn't have an unusable signal in many places while at home from a distant Verizon tower. But that's just in one place though I'm sure that thought process is everywhere where VZW competes with anybody. The more communications ventures that Verizon gets into, the more I think they are like "Globodyne." That science-fiction futuristic corporation that controls pretty much everything regarding communication.

This is a rather odd point for me because UK networks (and European networks in general) don't have domestic roaming agreements because they eash have close to 100% coverage themselves (owing to the smaller geographical areas and higher population densities involved).

Whilst I said in my previous post that the larger networks are in a better position to build national networks without the need for deomestic roaming agreements, in your opinion, how likely is this?

Yeah, I'm just glad to be with Alltel so I do get seamless national coverage and the perks of a large company while I'm still supporting a smaller one in America! Roaming agreements do help too!

I don't really have that choice. I can either choose Vodafone, which is the biggest global network, T-Mobile, which is the second, O2, which is owned by another large global network, Telefonica Moviles; Orange, which is again another multi-national network or 3, which, yes you've guessed it, is yet another network spanning more than one country. If I want to support a British network that really just leaves me with Vodafone.

[UFO]

Originally Posted by scotsboyuk

Whilst I said in my previous post that the larger networks are in a better position to build national networks without the need for deomestic roaming agreements, in your opinion, how likely is this?

That was actually a very good, intelligent response. I had no idea you were thinking on a European/UK frame of reference and are completely and totally correct. I can see where you're coming from with your ideas.

As far as things go in the US though, it's true that the larger networks are definitely in a better position to build a national network. But I don't think it is something that will ever happen here in the US. Not that it wouldn't happen given enough time, I just think it would take so long that current cell technology will be obselete before it would happen. The closest provider to doing this now is probably VZW, but they have a long way to go because they rely on other providers a lot as it is now, not just in areas they don't yet cover, they could use a lot of help in areas they claim to cover, they just don't do it that well--such as where I live because they fall back onto Alltel a lot. Verizon builds networks like this a lot from what I hear.

The problem with it happening anytime in the near future is the current layout of the US population which is mainly in urban areas and most rural areas are already covered by a smaller provider with great coverage. This makes building in rural areas unprofitable. Many of these smaller providers would have to be bought out or VZW, or whoever does this, which would be an extremely expensive and slow process. Why not just give up the market share and reach a roaming agreement?

But if I am completely wrong, the technology remains for a long period of time, and somebody does eventually do this by building enough towers and buying enough other companies and customers flock to that company and put many others out of business. How long could it be before the company is forced to break apart because it has been determined a monopoly by the federal government? Honestly, free M2M would be seen as an unfair advantage. Whoever is able to do this, it would create such a disparity between subscribers and the company would continue to gain subscribers by leaps and bounds and get richer while being the only network that could claim national coverage. It would be especially unfair because some providers are limited by the fact that they can't get a license to provide native service in some areas because there are only so many licenses per area. But I truly don't see how multiple companies could build exclusive, national networks on the same timeline as VZW to prevent them from being ruled a monopoly, so they will limit themselves just enough to avoid monopoly status if they ever get close which they just aren't right now.

Us Americans and our CDMA and roaming agreements!! *Note* This response is just my opinion though.

[TelcomJunkie]

Unfortunately Sprint and Nextel can't swap frequency usage between the networks. Nextel is an SMR and not a cellular provider so their frequencies come out of one of the SMR ranges. While Sprint is using the PCS segment which can't be used by Nextel based on FCC licensing requirements.

Sprint is hard pressed to get extra frequencies but for the most part Nextel has available frequencies in every market. The only other tenants of that band segment was other SMR systems which Nextel had been buying up left and right for pennies on the dollar since the users had typically already moved to Nextel and the SMR system they were previously using was now defunct. Sprint has a set of frequencies for every market, while Nextel just has to apply and if something is open they can get a license for them.