In one decisive move, Sprint (NYSE:S) apparently has become the largest landline provider in the United States by the number of addresses available to serve. While technically not the same as a traditional landline service, from the vantage point of the user, it will function the same, as users will have the ability to use almost any home phone with Sprint's service.
Landline use is shrinking and while at first it may appear that entering into a market space that is mature and shrinking is the last thing a company would want to do, in this case, it is brilliant. Sprint already has most of the capital outlays in place to offer the service, so each additional revenue dollar gained can be expected to largely go to the bottom line. The service will take away dollars from competitors ATT (NYSE:T) and Verizon (NYSE:VZ), who will now be faced with another accelerant to the land line subscriber shrinkage. Just as the new dollars moving to Sprint will have oversized margins, the dollars removed from the competitors will largely come from their bottom lines.
This move works very well with the mobile space in which Sprint competes. Based on the last conference call, Sprint has moved up in customer satisfaction and is now among the best-in-class in the industry. A favorable customer experience with the Phone Connect service would seem a logical pathway towards increasing mobile subscriptions, especially when one considers the ability to consolidate one's monthly bills.
While I would imagine Sprint has the bulls-eye painted on AT&T and Verizon, there is another company with perhaps the biggest target in terms of exposure. Vonage's (NYSE:VG) principle business is the VoIP space. In order to use Vonage a customer must already have high speed Internet. This leaves the customer and Vonage hostage to the quality of the Internet service provider. In the cases when the Internet provider is Charter (NASDAQ:CHTR), Century Link (NYSE:CTL), Comcast (NASDAQ:CMCSA), or Time Warner (NYSE:TWC), on top of AT&T and Verizon, Vonage must compete against the very companies that make its service available. This move really leaves Vonage out in the cold and may be much more problematic for Vonage than is immediately apparent.
Sprint's move into the home and office telephone space may best help Sprint compete with AT&T and Verizon, but for companies like Charter, Century Link, Comcast and Time Warner, every dollar lost is likely to mainly be dollars that fall to the bottom line.
If Sprint can execute the entry into home and office phones effectively, with a high level of customer satisfaction, Sprint's plan of low price leadership can be expected to capture a significant portion of market share in this space.
Here is a look at the prices I found online from the various providers.
*Some carriers offer from 3 to 12 months promotions for signing up. Prices shown are what I found online using a California zip code.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in S over the next 72 hours.