Sprint Promises Increased Frugality and Efficiency in Network Expansion

by Matt Klassen on May 12, 2016

102640235-IMG_5897.530x298When you have less cash than all of your rivals, well you have to know how to spend it wisely. That was the message from Sprint CEO Marcelo Claure coming out of his company’s quarterly earnings call last week.

While Sprint has attempted to differentiate itself in an increasingly saturated mobile market by offering some of the industry’s most radical discounts, the long term gains of such promotions come with a steep short term cost, and with that Claure noted that in order to thrive, his company would need to manage its meagre resources wisely as well.

“If you’re poorer than others, you have to do things differently,” he said on a call with reporters.

That means that in order to build a better, faster, more comprehensive network the company will have to do it carefully, discovering where best to spend its money to get the most bang for its buck, and avoiding cash pitfalls that offer relatively little return.

While Sprint’s most recent quarterly report saw the carrier gain valuable postpaid subscriptions while rivals Verizon and AT&T lost in that area, the good news ended there, as financial haemorrhaging continued unabated. Sprint reported losses of $554 million on revenue of $8.07 billion, compared with losses of $224 million on $8.28 billion during the same quarter last year.

Although most of the company’s losses can be attributed to the company’s aggressive promotional campaigns, ones that offer half-off to customers switching from Verizon or AT&T and others that offer a 30-day money back satisfaction guarantee, Claure is confident that those losses can be mitigated by increasingly efficiency and frugality in other areas, such as network development.

Now cost-cutting is nothing new for Sprint, as the nation’s fourth largest wireless carrier has already slashed $1.5 billion in spending over the last six months. Although Claure acknowledged that his firm has done a good job so far, he admitted that to date such cost-cutting efforts have been aimed at the “low-hanging fruit,” noting that the next phase of austerity measures will be significantly more challenging.

“We’re not cutting costs for survival. We’re cutting costs to be a lot more efficient,” said Claure on CNBC’s “Squawk on the Street.” “I guess when you’re a company that has less money, you are taught to be a lot more efficient.”

But this leads to Sprint’s current conundrum. Sure its aggressive promotions have been able to attract more valuable postpaid customers, but truth be told, a company offering half-off their competitors best price would be hard pressed not to grow. The challenge for Sprint will be to keep those customers over the long term, and to do that, Sprint will need to improve its network…the exact place it’s hoping to cut costs.

Now to be fair Sprint’s plan to increase the efficiency of its network upgrades has to date meant the replacement of legacy tech and finding cheaper real estate to deploy its towers, but with promises of “more challenging” cuts to come (and promises of increased focus on retail expansion), one has to wonder if Sprint will be able to invest enough to enhance its network to truly compete with its rivals.

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

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