Sprint’s Big Stumble = Cometitors’ Gain

Sharon Armbrust | October 25, 2006, 06:08 PM

Now it’s Sprint’s turn to get eaten alive. Verizon ran rough shod over Cingular as it struggled to integrate its AT&T Wireless acquisition 20 months ago. Now Verizon and Cingular are both feasting on Sprint’s woes. Sprint is expected to be licking its wounds when it reports 3Q results tomorrow. Wall Street is forecasting deep subscriber hits and probably lower ARPU again (Sprint had a $3/mo. drop in ARPU y-o-y in 2Q06.
Sprint’s iDen network , which the company neglected post merger, optimistically expecting to be able to migrate iDen PTT subs to its CDMA Network solution much faster (it just signed on with Qualcomm’s QChat in October), has been bleeding high value customers and they’re getting hungrily picked up by Verizon and Cingular, both of which are now competing heavily on network quality claims.

Equally painful for Sprint is that the subscribers it has been losing are from its highest revenue, highest margin category. Its ARPU dropped in 2Q06 to $62/mo. from $63/mo. in 1Q06. Should it be down again in 3Q, the pressure on its cash flow margin will be heavy as Nextel’s legacy of the highest revenue and cash flow competitor in the marketplace continues to get eroded.