Sprint Corporation (S, Financial) Chief Executive Marcelo Claure had assumed his office a year ago when the company was in a bad spot. The third-largest American carrier was nothing better than an ailing patient then. However, last week the top boss made an ambitious comment at the Code Conference held in Rancho Palos Verdes, California, saying that in less than a couple of years, Sprint’s wireless network will be best-in-class. Is this too good to be true? Let’s find out.
Tough claim to accept
Sprint has been struggling to sustain its position as the third largest telecom player in terms of subscriber base. T-Mobile US Inc. (TMUS, Financial) has been growing aggressive and expanding customer base to surpass Sprint. In response to this, Claure came out with promotional efforts such as “cut-your-bill-in-half” and hastened network improvements across the country.
Rising operating costs and a cash drain have raised doubts regarding Sprint’s ability to finance its network plans. In the fourth quarter, the company saw a negative free cash flow of $914 million and cash balance of $4.2 billion. Under such set-up a claim as “expect in 18 to 24 months, our network will be No. 1 [or] 2,” appears almost unreal.
Competitive standing
Several network surveys have been done in which Sprint’s data speed has received an extremely poor ranking. But as per recent studies, phone calls and text messages have seen notable improvement. Sprint still has to go a long way as far as network coverage is concerned to catch up with its rival -- specifically the telecom biggies Verizon (VZ, Financial) and AT&T (T, Financial). Verizon mostly holds the top position when it comes to wireless coverage, closely followed by AT&T. T-Mobile asserts to have the fastest network and is growing its coverage at a torrid pace.
Sprint was almost in the verge of losing its lead over T-Mobile in the last quarter, but stuck to its position by making around 1.2 million net new customers addition in the latest quarter. T-Mobile, in contrast, made 1.8 million new addition in the same period. The fourth largest carrier trails Sprint by nearly 500,000 subscribers. Customer addition for the second straight quarter is an indication of development for Sprint as the company has been incessantly losing customers for years since the Nextel shutdown.
When asked about Sprint’s bold claims, both AT&T and Verizon preferred not to comment. However, T-Mobile CEO John Legere didn’t miss the opportunity of responding with a short comment - "Swing bata bata!"
"Patient is doing well now, and I think the patient is in stable condition" – Marcelo Claure
Sprint has been recovering from tough times and Claure is confident about its future prospects. "You can invite me back here in two years -- our network will be ranked No. 1 or No. 2," in the national market – his statement at Code Conference says how strongly he feels for the carrier’s turnaround.
Even if Sprint gets closer to what Claure said in two years, it would be a great achievement particularly after having continuously lost subscribers quarter after quarter. The company introduced a variety of fresh promotions and discounts to attract customers, while moving ahead with the network improvement. Sprint has trimmed prices, brought new family plans, provided leasing program for smartphones in an effort to expand its subscriber base.
Solid plan in place
Claure plans to leverage the company's wireless assets to make Sprint’s network superior. The massive spectrum holding is the biggest asset a wireless entity could have, particularly in a scenario when data usage is growing at a robust pass. Sprint is in a solid position as it has spectrum in three bands that is extremely useful in delivering enhanced experience in due course of time if deployed properly.
Claure is determined to execute his network build-out plan, but for that it would need to pour in billions of dollars. Does Sprint really has the financial means to go ahead with the plan? The Bolivian-born executive said that Japanese-based Softbank’s Masayoshi Son has given a "pretty strong commitment to build a strong network." Softbank hold 80% ownership stake in Sprint, and thus has great interest in pushing the spectrum-rich carrier’s network plans. The deep-pocketed owner’s big backing and financial cushion is a huge support to Sprint’s network overhaul.
