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The need for a strong Sprint Nextel

The need for a strong Sprint Nextel

Could the skies be clearing over beleagured Sprint Nextel?
According to the Wall Street Journal, which cited comments from Verizon Communications President Denny Strigl, the nation’s No. 3 carrier could be turning a corner. Strigl reportedly told an investor conference that Sprint Nextel’s performance had picked up over the past 30 days and that Verizon Wireless was not seeing as many port-ins from its smaller rival. (Most analysts expect Sprint Nextel to post continued customer defections in the second quarter.)
The possibility of Sprint Nextel turning around its operations is good news for both the carrier and its investors, but it’s also good news for Verizon Wireless and the industry’s No. 1 player, AT&T Mobility.
With Verizon Wireless in the midst of acquiring Alltel and Rural Cellular, as well as AT&T Mobility’s recent acquisition of Dobson, a strong No. 3 player could soothe any fears by regulators that the wireless industry is losing its competitive nature. (Not to downplay No. 4 carrier T-Mobile USA, but the carrier has less than half the customers of Verizon Wireless and AT&T Mobility, despite continued strong customer growth.)
CTIA estimates there are more than 260 million wireless customers in the U.S., with the nation’s two largest operators controlling around 54% of the total. Add in Sprint Nextel and T-Mobile USA and that control swells to around 85%. But, having four carriers serve 85% of customers looks better from a competitive standpoint than two carriers serving 54%. With regulators beginning to look more closely at the wireless industry’s consolidation frenzy – see Verizon Wireless’ ongoing issues with Rural Cellular – the appearance of a competitive landscape in wireless is becoming increasingly important.
And this is what makes Strigl’s comments so interesting. The play is similar to Microsoft’s $150 million investment in Apple back in 1997, at a time when Apple was hurting and regulators were beginning to eye Microsoft’s near-dominance of the personal computing space. The deal gave Microsoft an inroad to offer its software to Mac users, but it also helped prop up an ailing rival that Microsoft then could use to prove a competitive software market.
Strigl’s comments that a rival is doing better highlights today’s competitive imbalance in the wireless industry and bolsters the need for a strong Sprint Nextel.

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