With the announcement of AT&T's purchase of T-Mobile, the nation's third largest wireless carrier Sprint was left stranded again at the merger altar. Despite frantic proposals, the company has failed to woo a marriage partner.
Sprint CEO Dan Hesse took out his frustrations on AT&T, claiming the consolidation would give the merged firms too much economic power in the mobile market. "I have concerns it would stifle innovation," Hesse whined in a speech.
Most observers think Hesse doth protest too much. Sprint would like nothing better than to arrange for a corporate marriage that would increase its market share. In fact, the word on the street is that Sprint did more than just flirt with T-Mobile, hoping to land a deal of its own.
When Sprint's overtures were rejected, Hesse began acting like the jilted lover, stamping his feet in disapproval of the AT&T and T-Mobile marriage. Apparently, his failure to negotiate a deal for Sprint precludes other wireless firms from acting in their self-interests.
Perhaps, Hesse should spend less time appearing in Sprint's snooze-inducing television commercials and more attention fixing his firm's performance. The Overland Park, Kansas, based wireless company carded a stunning $595 million operating loss last year as it struggled to increase its market share.
Most of the company's growth in 2010 was prepay customers, less lucrative than post-paid subscribers on monthly rate plans. At the end of the year, Sprint had 49.9 million wireless subscribers, of which 12.3 million were pre-pay customers, according to the company. That means these bottom feeders represent nearly one-quarter of the company's subscriber base.
Unfortunately, Sprint's cost structure is hamstrung because it operates two incompatible wireless networks. This is a legacy of its ill advised 2005 purchase of Nextel, which operated a walkie-talkie mobile network. To call the $6.5 billion merger a failure would be too kind. It was an unmitigated disaster.
Sprint overpaid for a technology that was being fast becoming obsolete by the emergence of feature rich phones. At the time of the merger, Nextel was the third largest wireless company and Sprint was a solid fourth. Six years after the merger, Sprint is mired in third place, stuck between giants AT&T and Verizon and a host of bit players at the low end.
Unfortunately, Sprint has learned nothing from its past corporate pratfalls. The company is pursuing WiMax as its technology choice on its speedier 4G network in an uneasy partnership with Clearwire. Meanwhile, most of the wireless world has adopted a competing technology standard, Long Term Evolution (LTE). This will make any combination with another wireless player more difficult because the network synergies will be missing.
Another head-scratcher has been Sprint's all-you-can-eat data plan, which allows customers to gobble as much bandwidth as they like for one monthly rate. Meanwhile, AT&T offers tiered-pricing plans for data and Verizon is expected to soon follow suit. With bandwidth such a precious commodity in wireless, it makes no economic sense to essentially give it way.
For all the reasons cited above, Dan Hesse's urgent pleas for undoing the AT&T-T-Mobile deal should fall on deaf ears. Hesse and his predecessors at Sprint are to blame for the company's precipitous decline. Worrying about a deal that has not even been finalized would seem to be a waste of time, given all Sprint's issues that require management's immediate attention.
Hesse would be advised to quit playing the role of the rejected bride. Instead, he should figure out how to put some lipstick on his mistake-prone pig of a company in hopes of attracting a wireless marriage proposal.
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