You know, I’m getting a bit sick of reading about how the AT&T/T-Mobile deal is going to single-handedly kill Sprint Nextel (NYSE:S, news, filings). You know, the ones where it sounds as if Verizon doesn’t stoop to buying them by next month then the ground will open up beneath their feet, swallow them whole, and belch out pieces of shredded Clearwire. Yeah, those. So I just have to say something.
Sprint isn’t losing money each quarter because they’re smaller than the big two, they’re losing money because they royally screwed up the Nextel acquisition. They didn’t lose customers for several years in a row because of excessive market leverage by Verizon and AT&T, they did it all without assistance. But they have mostly turned that corner, and to be #3 in size is not a death sentence. Really, it’s not. Even a distant #3. In this case, it’s 49.9M subscribers and $32.5B in revenue with a nice running start at 4G already in progress. You CAN make money without having $100B in revenue. I swear, you can. In fact, there are wireless providers that do it on much less – MetroPCS for one.
The T-Mobile deal certainly reduces their options, but I take exception to the theory that the fat lady has sung and is now at the bar knocking down her third bourbon. On the contrary, Sprint has an opportunity here to retool itself as the only remaining insurgent provider of any significance. And they have a whole year in which to make hay with that status before AT&T actually succeeds in buying T-Mobile (assuming it even happens). Let’s put off writing epitaphs for a while yet, and give Sprint a chance to dig in and maybe think creatively of ways to turn parts of this situation to its advantage.
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Categories: Mergers and Acquisitions · Wireless
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Sounds like Telecom Ramblings is making a pitch to ATT Wireless to advertise on this website.
It also reads like a letter of request to testify on behalf of ATT Wireless at the hearings.
There is a perfect William James quote that captures your entry.
“A great many people think they are thinking when they are merely rearranging their prejudices”
In other words, if I’m not following the approved line 100%, I must be a hypocrite who’s opinion is for sale. Right. For the record, AT&T Wireless doesn’t know I exist and that won’t change anytime soon. They’re too damn huge.
Not that I expect to change your mind, but it is possible to think (and argue) that the AT&T/T-Mobile deal should be stopped by regulators and also that Sprint has not been dealt a mortal blow from which they cannot recover. The deal is bad news on many fronts, but that doesn’t mean Ma Bell has all the cards just yet.
Agreed: Sprint isn’t dead yet. They have survived as the underdog for several years and dealt with blows before though I don’t see the AT&T/T-Mobile deal as a blow to Sprint.
think that’s what the french said when the germans occupied the sudetenland (western Czechoslovakia) in October 1938. 😉
Agree with you on the analysis and I’ll vouch for your -relative- objectivity over the many years I have followed TR. There someone said it.
Rob has always struck me as a fair and reasonable analyst. That being said, i agree that sprint fully made their own bed. however, the notion that this poorly run company that abuses its customers and under invests is going to compete with ATT and VZ strikes me as unrealistic. i don’t know if the fat lady has sung, but the free market is clearly showing signs of creative destruction. why use sprint? they don’t have the best network (vz), the best devices (att), the best bundles and value propositions (att, vz) or best economics (locals etc like leap, metro-pcs, etc).
the network effect rules — networks are more valuable the more end points they connect to (see: http://en.wikipedia.org/wiki/Network_effect). att had a great deal with apple, vz with android phones. now both with each other. one GSM and one CDMA carrier have emerged… maybe sprint hangs on and becomes as “relevant” as they are competing with att-sbc-bellsouth-ameritech-pacbell or as they do with vz-mci-vodafone-nynex-bellatlantic-gte. or maybe not
reread your Schumpeter. his concept of creative destruction was NOT based on inorganic combinations eliminating competition, but rather technological innovation forcing obsolescence in older technologies — e.g., the automobile replacing the horse and buggy.
Combining AT&T and T-Mobile is hardly an example of creative destruction.
yes and no. we can agree that there isn’t too much “capitalism” going on in the subsidized and protected state phone monopolies of USA-1 (vz-bellatlantic-nynex), USA-2 (att-sbc.bellsouth-pacbell-ameritech) and the German Government’s Department of Telephones competing in the first place.
but today’s ATT is actually, at its core, the smallest baby bell who swallowed the others by being more aggressive, more invested and more engaged. where was sprint when the iphone was offered? if i recall correctly, they bet, in some order on: palm, IDEN, push-to-talk, pre-paid, MVNO (except when they didn’t), separate op partners (nextel, cdma partnerships).
The point was that sprint, who never picked a strategy, territory, or other focus, simply cannot compete with those that did. The better run guys had/gained access to capital, better returns, more users (network effect allowed free mobile-to-mobile), key investments, etc.
it barely matters whether sprint gets bought, sold, merged or just goes away. who will notice? this company commercialized the first fiber optic cables (recall: pin drop) and then fell asleep for decades. they are almost as interesting to me as DEC, compuserve or nortel, other companies that had the right ideas 20 or 40 years ago and then forgot to execute. that the winners eat the losers for a snack, is in fact, very familiar to Schumpeter…
agree and nothing would be wrong with Sprint disappearing because they have lost their innovative way and technological edge. But ATT accelerating the process by buying number four is nothing more than cashing in on their years and years of lobbying investments, not technological superiority. Permitting AT&T to acquire T-Mobile is closer to social engineering than natural selection. AT&T can only snack on Sprint if the regulators feed AT&T T-mobile first.