No doubt that the chatter has centered around AT&Ts acquisition of T-Mobile. What has not been discussed much is the moribund state this has left Sprint in. This has left the Overland KS based company in a precarious state as its shares tumbled to a value of less than 99% of the S&P. Theories abound as to how Sprint will dig out of the hole and revive itself. One thought that occurred to me was that America Movil chief Carlos Helu Slim would finally decide to purchase Sprint simply for the value of its network. Sprint’s licenses are worth almost 20 billion versus their market cap of 13.6 billion.
If done for the sake of gutting the company, and using its network America Movil would be able to continue its run on lower ARPU customers that has already made it a very quiet yet potent player in the prepaid space. Yet life as an MVNO maybe where Mr. Slim wants his assets to stay, it has worked thus far, why tamper with success.
What is not clear is whether Sprint will stay passive and appeal the purchase (already confirming their weakened state) or pursue the purchase of MetroPCS and Leap. Analysts are quick to throw these theories out, yet it would only net Sprint an extra 2% of the market when all is said and done. The other views point towards taking over the remaining 46% of assets at Clearwire which could help both companies in the long run – that is if they actually have a long run in them.
One thing to ponder is whether it is worth to pay heed to the “bigger is better” bravado emanating from the market place or focus on the fall out from TMO. Not a lot of customers are happy at being returned or going to AT&T. Knowing the lack of coverage on both networks in rural areas it made me smirk when I heard an allusion to how service in these areas would be improved by the merger. I was there four years ago as a Sprint employee when customers came with letters from AT&T dismissing them owing to their living in a roaming area. With AT&T this happens more often than not – I would advise the market pundits to get off the interstate and take in the sites of country roads and form their own opinion. AT&T quickly drops to the GSM signal whereas TMO just disappears. A couple of miles down the road you have no bars to mention in spite of AT&T’s constant yammering on the media. AT&T is about deceit, make no mistake.
For Sprint to overcome this hurdle they may need to focus on trimming costs rather than adding. Purchasing smaller carriers seems to me to just be a big distraction, yet one thing that they can do it for would be to raid the piggy bank that MetroPCS may have. I doubt Leap (Cricket) has any as they were in foul condition just a few months ago. Yet this is just pocket change in the great scheme of things and cannot address incompetent management and flailing employee morale at Sprint.
Sprint sales employees are on very tight performance management programs and falling below 90% of quota nets a warning and a quick path out. Very little is done to help these people along – this has affected the company in spite of its great infrastructure. With executives living in the clouds they still do not get it and the appetite for mergers maybe lost on the rank and file. I see very little value in Sprint attempting a purchase of MetroPCS, and it would come at a premium. What may be more advisable is to work on syphoning customers away from TMobile like MetroPCS did over the past years – but this game only works if you are willing to shed more layers of management and shut down some facilities that are redundant throughout the country. Either way, not a pleasant thing to be a Sprint employee these days.
A purchase by Verizon is plausible if only for the reason gutting I referred to earlier. This may be what AT&T did it for with TMO – just harness the horsepower of the network AT&T neglected to build these past years. Yet Verizon has done quite well without touching Sprint. The meat has been on the table for a long time, and Verizon never had an appetite for it, why would they now?
