« Atlantis Atschmantis | Main | Beware stupid employees »
Sprint Nextel struggles through downturn
Sprint Nextel, the US's third largest mobile operator and WiMax bearer, is finding it difficult to deal with the cold chill of the current recession.
The firm, which owns a significant, nationwide fibre optic network spanning the US, is Intel's flag bearer when it comes to high-speed, fixed mobile WiMax technology. However, Sprint, which has managed to fight its way up from the bottom of the telecom market to lag behind only AT&T and Verizon Wireless, is beginning to show the strain.
Recently Sprint Nextel admitted customers were deserting it in droves and it would have to lay off some 14 per cent of its workforce, approximately 8,000 jobs, in an attempt to cut costs and save up to $1.2bn a year.
The firm's woes are partly due to the current financial crisis, but they also have roots further back, namely the 2005 acquisition of Nextel, which many questioned from the get-go. The two firms found it difficult to mesh, resulting in poor customer service and bad network performance stemming from a serious lack of capacity.
In 2008, Sprint Nextel, which provides a plethora of both national and international services for businesses, governments and consumers, lost 3.6 million contract and 600,000 pre-paid customers to other networks. Unsurprisingly, company revenues also began a downwards spiral, which saw the firm's turnover plunge 10 per cent in the first three quarters of last year alone.
As if plunging revenues were not enough, Sprint Nextel also posted net losses of $1.17bn and saw its share price depreciate by 60 per cent to a paltry $2.45. This, despite measures taken by Sprint last year, including layoffs of some 4,000 employees, reducing its outsourcing, closing 125 shops, and slashing over 4,000 third-party distribution points. But the constant cost-cutting does not seem to be showing the desired results.
In addition to cutting costs, Sprint Nextel seems to be making a concerted effort to win back customers, especially within the younger population segment, signing deals with content providers like social networking giant MySpace, sports network ESPN and filmmaker Disney. These measures, however, pale in comparison with the huge bet the firm has placed on mobile WiMax.
It is actually Clearwire, in which Sprint Nextel holds a 51 per cent stake, that heads Sprint's mobile WiMax initiative, with other shareholders including Intel, Google, Comcast, Time Warner also heavily invested in the new technology. Many have high hopes for WiMax, especially since it purportedly offers between 2Mbit/sand 4Mbit/s while most other cellular networks currently struggle to even reach 1Mbit/s.
Last year Sprint Nextel pushed ahead with Wimax by releasing a dual mode EV-DO/WiMax dongle, allowing users to switch from EV-DO to the faster Wimax network when in range of Clearwire's current infrastructure which spans Baltimore, Maryland and Portland Oregon.
There is, however, much more work needed if WiMax, and indeed Sprint Nextel, is to succeed. Clearwire has consistently complained over the past few months that it needs more money if it is to ramp up its rollout of the wireless network, much to the dismay of its investors.
If Clearwire does not begin picking up the pace, Sprint Nextel will find it exceedingly difficult to start exploiting WiMax's fast speeds and the technology might even fall by the wayside as other technologies like LTE creep up behind it.
With WiMax looking shaky, there is also talk that Sprint Nextel might succumb to a takeover by either T-Mobile or SK Telecom. But what this will mean for Intel's wireless network and for Sprint Nextel itself, only time will tell.
The firm, which owns a significant, nationwide fibre optic network spanning the US, is Intel's flag bearer when it comes to high-speed, fixed mobile WiMax technology. However, Sprint, which has managed to fight its way up from the bottom of the telecom market to lag behind only AT&T and Verizon Wireless, is beginning to show the strain.
Recently Sprint Nextel admitted customers were deserting it in droves and it would have to lay off some 14 per cent of its workforce, approximately 8,000 jobs, in an attempt to cut costs and save up to $1.2bn a year.
The firm's woes are partly due to the current financial crisis, but they also have roots further back, namely the 2005 acquisition of Nextel, which many questioned from the get-go. The two firms found it difficult to mesh, resulting in poor customer service and bad network performance stemming from a serious lack of capacity.
In 2008, Sprint Nextel, which provides a plethora of both national and international services for businesses, governments and consumers, lost 3.6 million contract and 600,000 pre-paid customers to other networks. Unsurprisingly, company revenues also began a downwards spiral, which saw the firm's turnover plunge 10 per cent in the first three quarters of last year alone.
As if plunging revenues were not enough, Sprint Nextel also posted net losses of $1.17bn and saw its share price depreciate by 60 per cent to a paltry $2.45. This, despite measures taken by Sprint last year, including layoffs of some 4,000 employees, reducing its outsourcing, closing 125 shops, and slashing over 4,000 third-party distribution points. But the constant cost-cutting does not seem to be showing the desired results.
In addition to cutting costs, Sprint Nextel seems to be making a concerted effort to win back customers, especially within the younger population segment, signing deals with content providers like social networking giant MySpace, sports network ESPN and filmmaker Disney. These measures, however, pale in comparison with the huge bet the firm has placed on mobile WiMax.
It is actually Clearwire, in which Sprint Nextel holds a 51 per cent stake, that heads Sprint's mobile WiMax initiative, with other shareholders including Intel, Google, Comcast, Time Warner also heavily invested in the new technology. Many have high hopes for WiMax, especially since it purportedly offers between 2Mbit/sand 4Mbit/s while most other cellular networks currently struggle to even reach 1Mbit/s.
Last year Sprint Nextel pushed ahead with Wimax by releasing a dual mode EV-DO/WiMax dongle, allowing users to switch from EV-DO to the faster Wimax network when in range of Clearwire's current infrastructure which spans Baltimore, Maryland and Portland Oregon.
There is, however, much more work needed if WiMax, and indeed Sprint Nextel, is to succeed. Clearwire has consistently complained over the past few months that it needs more money if it is to ramp up its rollout of the wireless network, much to the dismay of its investors.
If Clearwire does not begin picking up the pace, Sprint Nextel will find it exceedingly difficult to start exploiting WiMax's fast speeds and the technology might even fall by the wayside as other technologies like LTE creep up behind it.
With WiMax looking shaky, there is also talk that Sprint Nextel might succumb to a takeover by either T-Mobile or SK Telecom. But what this will mean for Intel's wireless network and for Sprint Nextel itself, only time will tell.
Spanish
Post a comment