Sprint: Push-to-Talk Is No Longer the Revenue Driver It Once Was

Includes: S, T, VZ
by: Trefis

Sprint (NYSE:S) competes with mobile operators like AT&T (NYSE:T) and Verizon (NYSE:VZ) in the postpaid business where mobile phone subscribers pay a recurring monthly fee for mobile service. Sprint’s iDEN push-to-talk subscribers have historically been an important part of the company’s postpaid busines. However, Sprint’s iDEN subscriber numbers have declined in recent years and we expect such declines to continue.

iDEN is Push-to-Talk Mobile Phone Service

Sprint’s postpaid subscribers mainly consist of CDMA and iDEN subscribers. Integrated Digital Enhanced Network (or iDEN) refers to push-to-talk technology, which Sprint acquired after merging with Nextel in 2005. Push-to-talk service has been popular amongst safety workers (paramedics, firefighters, security personnel) and outdoor professions (construction, repair).

We estimate that about 47% of the $4.31 Trefis price for Sprint’s stock can be attributed to its Mobile Plans and Phones business, which includes the contribution from Sprint’s voice service to CDMA and iDEN subscribers.

iDEN Subscribers Declined 50% in Four Years

Sprint’s iDEN subscribers have declined from about 16.6 million in 2005 to about 7.3 million in 2009 primarily due to two factors:

(i) Sprint experienced technical issues with Nextel’s iDEN network that resulted poor service and customer dissatisfaction.

(ii) After the merger with Nextel, Sprint’s customer service deteriorated, which led to net losses in subscribers, particularly amongst dissatisfied iDEN subscribers.

iDEN Subscribers Expected to Decline to 5 million

We expect Sprint’s iDEN subscribers to continue to decline and reach about 5.2 million by the end of Trefis forecast period. Since iDEN still uses 2G technology, there is a lack of incentive to invest capital to improve the network as subscriber counts continue to decline. This reinforces our belief that iDEN subscribers will remain dissatisfied with their service, especially in comparison to better network alternatives, and that iDEN subscribers will continue decrease.