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With T-Mobile Acquisition Dreams Put Aside, Sprint to Go It Alone and with New CEO

by Philip Kendall | 8月 06, 2014

Sprint has decided not to pursue the acquisition of T-Mobile US, and is replacing CEO Dan Hesse with Brightstar’s Marcelo Claure.

Now that Sprint is focusing on going it alone at least in the near-term, what do they need to do to gain market share, improve on their financials, and be a strong dynamic player in the competitive US wireless market?

Here are some comments and recommendations from our Wireless Operator Strategies team:

Sprint market positioning:

·         Being a strong third player in the US wireless market is not a bad place to be—the trouble is Sprint has to fight T-Mobile US for that spot, and T-Mobile may get new ownership that is not afraid to fight a real price war.

·         Irrespective now of who owns TMO, Sprint is stuck between two massive converged players and a price-fighting TMO (who may get even more aggressive on price if Iliad buys them).

·         Softbank ownership has helped to move the Sprint investor base to one with a bit of a longer term view to build on the new network foundation, but the company and its new CEO need to quickly move from their baby steps on new pricing propositions and their reinvigorated focus on Small and Medium Enterprise (SME) to differentiate and prove the value and quality of their revamped network to not lose ground it cannot easily regain if a price war erupts. For example they could  take the model of  customizable Virgin Mobile Custom plans with powerful parental control options to the Framily plan, or create a targeted home-zone video and music package building on their capacity as it is built out.

 

Regulatory sentiment:

·         Sprint and Softbank are wise not to lose time and focus with what looked like a fairly impossible acquisition due to regulatory sentiment, and need to power forward with a focus on organic growth as they pull out of the network issues that have pressured them through their upgrades.

·         The US authorities seem determined to make consolidation within the top four near impossible, or at least unpalatable for those involved. Deutsche Telekom and Softbank are obviously going to have to reconsider how they play in the market.

 

The Future for the US operators:

·         For DT there is the option to cash out with Iliad, though for Softbank it now needs to make Sprint work on its own. It may aspire for more, but in the medium term it needs to prove to consumer that it is as good as AT&T and Verizon, and as affordable at T-Mobile.

·         Sprint may reckon it will be well-placed if there is an Iliad-induced onslaught on pricing: AT&T and Verizon Wireless could struggle to justify their price premium, while Sprint can build up its low-cost sub-brands (Virgin Mobile / Boost) as prices tumble. The challenge with this thinking is that AT&T and Verizon Wireless are best placed to withstand some margin pressure, as they have been outperforming their smaller rivals on margins and churn, and could match price cuts if deemed necessary. For example, they could address price sensitive market segments—perhaps with their own sub-brands (as ATT is doing with Aio/Leap)—while preserving some of the value in their popular shared data plans, yet even these would come under pressure.

For more of our views on the US market dynamics as ownership of T-Mobile remains up in the air, see our Insight report: “Iliad Bids to Escalate US Market Disruption with T-Mobile Offer"

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