Mobile
Commentary
7/28/2009
03:01 PM
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Sprint 's Latest Acquisition Bad News for SMBs?

As competition among cellular carriers intensified recently, Sprint Nextel has struggled to grow its business. The companys future direction may be foreshadowed in its decision to purchase Virgin Mobile USA, however if that is the case, Sprint Nextel services may become less attractive to small and medium businesses.

As competition among cellular carriers intensified recently, Sprint Nextel has struggled to grow its business. The companys future direction may be foreshadowed in its decision to purchase Virgin Mobile USA, however if that is the case, Sprint Nextel services may become less attractive to small and medium businesses.At one time, Sprint was a thriving carrier whose leading edge technology, buoyed by its sharp focus on meeting the needs of business customers. However as consumers interests evolved to drive the cellular market, the company encountered a series of management missteps that resulted in an executive revolving door. While competitors such as AT&T and Verizon have been growing their customer bases, Sprint lost more than 4 million customers in the past year. Its 35.4 million subscriber base is now less than half of the markets top two players. So, what is the company to do?

Sprints purchase of Virgin Mobile USA is designed to boost the companys prepaid subscriber business, Boost Mobile. This business unit came along with Nextel, when Sprint acquired the wireless carrier in 2005. Unlike its core cellular business, Sprints prepaid wireless business has been experiencing steady growth. In fact, the business unit was expected to cross the 10 million customer mark later this year. Adding Virgin Mobile USAs 4 million customers positions Sprint as leading supplier of prepaid wireless services. While the carrier is happy to garner such a market position, it does not mesh with the companys core business. The primary users of the companys prepaid services are adolescents, but the carriers core business comes from business customers.

So Sprints long term strategy remains scattershot. The carrier had been an early supporter of WiMAX technology but scaled back support for that emerging wireless network option. There has been talk about the company being acquired (T-Mobile has been mentioned as a possible candidate), but there has not been much merger activity recently because of the economic downturn. In sum, the Virgin Mobile USA purchase shored up one business unit but did little to assuage larger concerns small and medium businesses have about the company.

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