Sprint’s Xohm WiMax Launch On Shaky Ground
By James Quintana Pearce - Wed 10 Oct 2007 05:10 AM PST
A couple of weeks ago activist investor Ralph Whitworth called for the resignation of Sprint (NYSE: S) CEO Gary Forsee, which he got, but he also raised reservations about Sprint’s move to build the Xohm WiMax network. He’s not the only investor who is worried about the WiMax roll-out either, and quite a few are calling for it to be abandoned or put back—CNet puts forward their view quite well. However, it also covers (and in fact, supports) the counterview, which is that “without an ambitious plan for the future, Sprint’s long-term prospects look even more bleak. The reason is simple. Cell phone penetration in the U.S. market is approaching saturation. For Sprint to grow, therefore, it will have to steal customers from competitors...But Sprint, the third largest operator in the U.S., may face a tough sell trying to entice customers to abandon their existing service for something similar. Unless Sprint wants to launch an all-out price war on its services, the company will need to present new, compelling features that no one else is offering.”
I tend to agree with this—WiMax not only provides better service but should provide ongoing cost savings to the carrier, if it works as promoted. Sprint obviously needs to work out something to stop bleeding customers because it simply shouldn’t be doing it, it’s a sign that something is wrong. But that doesn’t mean it shouldn’t invest in the WiMax network, which will give it a huge advantage over its competitors that’s going to be hard to beat—besides, this close to the commercial launch it would be best to see how it starts off. TechDirt has a good piece, with an explanation of the problem with Sprint’s investors: “The disconnect is that investors in Sprint are risk-averse, Blue-chip, dividend seekers. They invested in Sprint when it was a utility company. But Sprint’s “gambit” into WiMAX has taken them way out of the “utility company” comfort zone—and the reaction of the investors is as expected. With Xohm, Sprint’s risk profile is looking more and more like a big tech firm, say Yahoo (NSDQ: YHOO) or Apple (NSDQ: AAPL). Today’s Sprint needs risk-seeking investors, not fixed-income seekers.”
For now Sprint will continue with Xohm, but the new CEO may have other ideas.
Posted in: Companies, Operators, SprintNextel, Money, Technologies, 3G Etc
