Sprint Announces New Partnership amidst Mounting Losses

by Matt Klassen on July 29, 2011

Already faced with the competitive adversity bound to be created by the impending merger between AT&T and T-Mobile, not to mention the fact that it remains the only carrier without an iPhone, the future looks increasingly bleak for Sprint Nextel, America’s third largest wireless provider.

Following its Q2 fiscal report yesterday, however, things got that much worse for the company, as bad investments and a mass exodus of subscribers saw Sprint dive further into the red.

But in an effort to keep itself from spiralling out of control, Sprint announced some good news for investors yesterday, as it secured a partnership with would be 4G network wholesaler LightSquared, a deal that will see Sprint receive an influx of cash in exchange for LightSquared receiving access to the company’s 3G network among other things. But will this partnership allow Sprint to continue to compete in an increasingly monopolized market?

Despite actually posting a 4 percent increase in revenues, up to $8.3 billion, Sprint posted a quarterly loss of $847 million, which equates to 28 cents per share. Compare this to Q2 of last year, which saw Sprint post losses of $760 million, and the picture begins to look bleak for Sprint as it tries to figure out a way to stay competitive with the market big boys, AT&T and Verizon.

The disappointing results stem mostly from a $588 million loss in equity related to bad investments, with several unforeseen expenditures, like a $52 million tax charge incurred in Michigan under a newly formed state law, making up the rest. With several consecutive quarters in red, I would guess that Sprint won’t be able to shore up these sorts of incidentals and bad investments for very much longer.

But Sprint’s problems don’t end there, as the company lost 101,000 customer subscriptions over the same quarter as well, as the draw of the iPhone on both the AT&T and Verizon networks was simply too much to pass up for many Sprint customers. It just goes to show you that while customers like a fast network, they like their chosen devices more.

In an effort to reverse its struggles, however, Sprint announced yesterday as well that it has struck a 15-year network sharing agreement with LightSquared, the network provider known for its work integrating advanced LTE 4G technology with satellite communications.

The deal will see Sprint receive an influx of cash, somewhere in the neighbourhood of $9 billion, in addition to approximately $4.5 billion in credits for satellite and LTE equipment—meaning that Sprint will be in on the ground floor if this satellite integration project takes off.

In return Sprint has agreed to host LightSquared’s spectrum, provide networks services, and allow LightSquared roaming access to Sprint’s expansive 3G network.

But as partnerships go, this deal is small potatoes, meaning it’ll be interesting to see if Sprint can use it to remain competitive in the face of mounting competition from both AT&T and Verizon. As one who appreciates market diversity, I truly hope so.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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