October 23, 2014

The Sprint Situation

One could get a headache looking at what’s going on right now with Sprint Nextel and the buyout rumors. Based on subscriber count, Sprint is the #3 provider in the US, but you wouldn’t know that by looking at recent headlines. Talks of merging, buyouts, and bankruptcy have been rampant of late. From my standpoint, things are going to get worse for them before they get better. For consumers, however, they will continue to improve. Let’s take a look at what has happened over these last few months.

You may recall that back in November an offer came from SK Telecom to buy Sprint and essentially do a takeover. At the time, Sprints stock was trading at around $15 a share. If you looked today, you’ll see that it’s down to around $6 a share. Things have not gone well for the provider as they continue to bleed themselves to death by losing customers by way of shoddy customer service.

Sprint started the Great Unlimited Price War of ’08 when they brought out the unlimited calling plan for $119/month a few weeks back, but the potential for success would be short-lived as the other major carriers announced similar, if not better plans for $99 a month. Sprint came out with their plan in an effort to help keep the customers they seemed to be losing to competitors. The other guys, well, they did it just to keep pace. Sprint has since started offering an $89/mo plan, but nobody knows about it because Sprint’s not doing much to broadcast it.

Just last week the rumors started swirling again about a potential buyout, only this time it was involving T-Mobile’s parent company, Deutsche Telekom. Analysts weighed in with their opinions and arguments for or against the idea. Would DT be wise to take on Sprint Nextel? In my opinion, that’s a bad move to make. For starters, T-Mobile operates on GSM whereas Sprint uses CDMA and iDEN. The cost associated with maintaining three different networks would have to be astronomical.

What about the top two carriers? Verizon and AT&T would most likely be hit with some kind of anti-trust suit if they made a move for Sprint, so they’ll probably stay as far away as possible. It would be the same situation anyhow – integrating another network. You have to worry about more than just towers when you merge with or buy out your competitor. Now you’re dealing with thousands of people at every level, many of which would probably lose their job or take pay cuts.

In the end, something will end up happening to millions of Sprint’s 50+ million subscribers that analysts would not have foreseen five years ago. My guess is that it will get really ugly for Sprint as they continue to post terrible numbers and waste money on new marketing campaigns. Sadly enough we’ve seen companies rebuff the advances of another company out of sheer pride. We’ve also seen some of these companies fold up completely.