There have been a lot of good signs for Sprint-Nextel (S) this year. In the U.S., the market is dominated by AT&T (T) and Verizon (VZ). This has led to widespread speculation about a possible acquisition for Sprint in the coming months. The stock has risen on some of these rumors and consolidation is definitely a consideration among smaller players in the industry.
1. Subscriber network
Sprint has done well in last few years in growing its customer base now at $56 million. They are some of the most satisfied wireless customers in the country. Keeping them will be a concern as Nextel winds down until it’s killed off next June.
2. Creating revenue out of customers
This continues to be a challenge. Sprint had implemented a price rise or premium earlier to offset costs. But risk of price competition is high if other competitors consolidate.
3. 4G LTE as a standard
Sprint has been aggressive in adding 4G LTE phones to its portfolio including the Galaxy Victory. Although Sprint doesn’t have as much coverage as Verizon or AT&T but it has plans to expand. Its unlimited plan is also a differentiator.
4. Institutional investors
Currently, 90% of shares are tied up with institutional investors. Greenlight Capital, Franklin Resources and Goldman Sachs Group are among the top holders.
5. Poised to scale up
A merger deal will bring tremendous cost-savings to a mobile carrier of Sprint’s size. The fall-out of the AT&T and T-Mobile means that companies like Sprint and Metro PCS (PCS) are in position to take advantage of antitrust concerns.
Comparisons:
1. Sprint Nextel Corp. (S, Earnings, Analysts, Financials): Offers wireless and wireline communications products. Market cap at $16.32B, most recent closing price at $5.44.
2. AT&T, Inc. (T, Earnings, Analysts, Financials): Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $218.88B, most recent closing price at $37.94.
3. Verizon Communications Inc. (VZ, Earnings, Analysts, Financials): Provides communication services. Market cap at $129.6B, most recent closing price at $45.49.
4. MetroPCS Communications, Inc. (PCS, Earnings, Analysts, Financials): A wireless telecommunications carrier, together with its subsidiaries, provides wireless broadband mobile services in the United States. Market cap at $4.07B, most recent closing price at $11.19.
5. Clearwire Corporation (CLWR, Earnings, Analysts, Financials): Provides wireless broadband services. Market cap at $2.1B, most recent closing price at $1.44.
6. Leap Wireless International Inc. (LEAP, Earnings, Analysts, Financials): Provides digital wireless services under the ‘Cricket’ brand name in the United States. Market cap at $508.66M, most recent closing price at $6.42.
Written by Freda Ding
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