Sprint’s (NYSE:S) push-to-talk mobile phone network (also known as iDEN) has been suffering from customer losses over the last few years. However, a new initiative by Sprint to make push-to-talk technology available on its core CDMA network may translate to a big upside for Sprint’s stock if the company can slow iDEN subscriber losses. Such a development could also slow subscriber gains being made by rivals AT&T (NYSE:T) and Verizon (NYSE:VZ).
Sprint management recently indicated that the company plans to upgrade and modernize its network in order to improve the in-building coverage of its 1900 MHz CDMA spectrum, which will give it the flexibility to deploy several technologies including LTE, and migrate iDEN customers to CDMA .
Lack of coverage and perceived neglect of iDEN subscribers has led to customer losses
Ever since the merger with Nextel, Sprint has witnessed rapid declines in its iDEN subscriber base. This subscriber base essentially comprises of construction workers, security personnel and other professionals who find push-to-talk technology an effective and a quick way of communicating that facilitates better team collaboration. iDEN customers have felt the neglect from Sprint in terms of customer service, coverage and a limited phone selection. Moreover, the company had not made it clear in the past what the future of iDEN would be, which has led to uncertainty amongst businesses that rely on iDEN services.
Effective execution of migration can lift Sprint’s stock
If Sprint can develop effective push-to-talk technology over its CDMA network and improve its in-building penetration, this could lead to Sprint’s iDEN customers migrating to Sprint’s 3G / 4G CDMA network. This effectively could halt iDEN subscriber losses or even lead to a rebound in subscribers as former iDEN subscribers adopt push-to-talk on Sprint’s CDMA network.
Sprint’s iDEN customers are spread across postpaid and prepaid plans. In the chart above, we show how Sprint’s postpaid iDEN subscriber market share has declined in recent years and how we forecast that it will continue to decline. If iDEN share were to effectively remain flat as a result of CDMA migration (Sprint is able to effectively retain that share), there would be an upside of 15% to the Trefis price estimate for Sprint’s stock. Furthermore, if share were to rebound to 2005 levels of 8.5%, Sprint’s stock could nearly double. You can modify the forecast above to see the results for yourself.