Sprint: Ready For A Turnaround?

| About: Sprint Corporation (S)

Heavily criticized for not keeping up with its competitors, perhaps Sprint (NYSE:S) has finally gotten the message. It's not that Sprint hasn't tried over the years. Offering a variety of wireless data plan options, the company is the only wireless carrier to offer unlimited data usage. The company is also making changes to its Nextel 'Push to Talk' service by dismantling the current program to provide an updated version called Direct Connect, which will run solely on Sprint's network. Sprint also stated that it refuses to charge iPhone customers for FaceTime calls, while rival AT&T (NYSE:T) has stated that it probably will charge its customers.

But even with all these improvements and fairness towards customers concerning fees and data usage, AT&T and Verizon (NYSE:VZ) continued to outshine the company by offering faster data speeds in more locations…until now.

With the release of Sprint's 4G LTE network in select US cities and regions, the company hopes to build its reputation for providing fast and reliable service. In addition to upgrading its wireless services, Sprint has embarked in several new ventures that will hopefully highlight the brand and finally show the competition (and investors) it is still a force to be reckoned with.

Promoting M2M Technology

Reducing potential financial risk is vital to the success of any business, especially those in the insurance industry. For example, when a vehicular accident occurs, auto insurance carriers typically foot the bill to pay vehicle repair costs, pay settlements, and provide additional insurance to protect policyholders in the event of future accidents. So it makes sense that auto insurance carriers would want to find better ways to monitor policyholders to assess potential risks to correct driver behavior before an accident occurs and charge premiums based on past accidents and the risk for future ones.

Sprint, a leader in M2M (machine-to-machine) technology, now provides monitoring devices and software to help insurance carriers better assess some of these potential risks. This new technology also allows carriers to create new policy options and premiums rates based on driver performance, average vehicle use, and location. After a trial run with auto insurance carrier Esurance, owned by Allstate (NYSE:ALL), in Arizona, Esurance has decided to expand the program by offering it in Texas. Sprint has also launched a three-month trial program that provides other auto insurance carriers with similar devices, software, and use of the Sprint wireless network to store and retrieve driver information.

Expanding in the Prepaid Market

Virgin Mobile, which is owned by Sprint, provides prepaid mobile phone options for those who don't want the hassle of contracts or preset limits on cell phone minutes. In an effort to help promote alternative phone plan options, Sprint recently opened 10 Virgin mobile stores in the Chicago area to provide prepaid plans to iPhone users.

Even though the prepaid market was on the decline over the past few years, it seems to be picking up speed, so I think this is a good move by Sprint as it will be able to retain more of the revenue from sales by running its own stores instead of selling these plans through other retail outlets (cuts out the middleman) as it has in the past. The only downside to investing in the prepaid market is intense competition from AT&T, Verizon, and Cricket, owned by Leap Wireless International (LEAP). Each company currently has or plans to launch prepaid phone plans.

Taking Its Losses

Promoting a new wireless network, working with insurance carrier to promote new technologies, and expanding further into the prepaid market, is starting to pay off for the company. While Sprint took a loss for dismantling its Nextel branch in recent Q2 financial reports, the company still impressed investors enough to earn a jump in stock price. Currently trading around $4.30 per share, analysts and investors are hopeful the stock price will continue to rise. Considering the price hovered around $2.50-$3.00 back in June, I think analysts and investors are definitely on to something.

Sprint sales and revenue for the past five years paint an interesting picture. In 2007, the company earned $40.15 billion, but ended up with a net income of -$29.58 billion. This trend of losses has continued over the years as the company struggled to find its way in a highly competitive market. In 2011, the company earned $33.68 billion, with a net income of -$2.89 billion. And even though losses will again appear on Q2 2012 reports, these losses are mostly due to the losses suffered during the dissolution of Nextel. Consumers and investors haven't lost faith as Sprint remains the third-largest wireless carrier in the U.S.

Investing in Sprint

I think investors should stay with Sprint for now. Even though the company still takes a loss each year, this trend will not continue forever. The company has taken steps to reduce these losses by improving its network and expanding into different markets. Companies with diverse portfolios have an advantage over those without. When a failed merger, such as the one between Sprint and Nextel happens, companies can recover faster. I think Sprint learned its lesson from this merger and will hopefully not make the same mistake twice. Investors should remain cautious, however, as the company could take on too much, too soon in an effort to prevent future loses.

One potential roadblock for Sprint is whether the company will offer shared data plans in the future. Competitors like AT&T and Verizon already announced new pricing options that allow customers to add multiple devices on one plan. So far, the company has rejected the idea of offering such plans and maintains that it will keep its unlimited data plans instead. Whether the company will eventually change its mind depends on how happy it keeps current customers and how well it can attract new ones.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.