Sprint Nextel Still Working Through Merger Problems - Analysts
The analysts at Merrill Lynch have carried out another of their interesting visits to phone retailers in the USA to get a shop-floor view of what is selling, and to who. They state that Verizon Wireless and Cingular remain the dominant players, while Sprint continues to work through a number of issues.
T-Mobile USA?s launch of its ?myFaves? plans (unlimited calling to 5 numbers for $10) appears to be driving incremental growth and improving its postpaid mix.
For 4Q 06, they estimate that gross additions for the four national carriers will be down approximately 5% YoY and up 3% sequentially. They estimate that the main contributors to the decline year on year are Sprint and T-Mobile USA.
Their shop visits found that customer perception of the Sprint Nextel brand has not improved over the past few months. The Nextel base continues to be frustrated with service quality, and the dual mode (CDMA-iDEN) phone, which is available in certain markets, is being used primarily as a churn manager.
The Motorola CDMA phones do not appear to be driving gross additions, based on their checks, but may be helping with retention of customers who want to churn to another operator.
Based on the store checks, they believe that T-Mobile USA sales are benefiting from the Sprint credit policy changes, while Verizon is likely benefiting from the problems on the Nextel side associated with the iDEN network and spectrum reallocations.
Based on the store visits, Merrill Lynch is raising their net addition estimate for Cingular from 1.5 million to 1.7 million for 4Q06, in line with consensus, on stable to increasing postpaid net additions and prepaid seasonality. They are maintaining their net addition estimates for the others in 4Q06: Verizon Wireless 1.85 million and T-Mobile USA 950,000.
On the data services front, there is not a lot of good news for the network operators. Awareness of Verizon?s VCAST and Sprint?s Power Vision has improved, but it seems that most people are not interested in using the services.
Customers seem to be more interested in using the phones as music players than they are in watching video clips. Verizon?s exclusive sales of the LG Chocolate has given them an edge with the parents buying handsets for their children.
Parents view it as a cost saver, because they buy one device rather than a separate phone and MP3 player. Good news for LG, not so good for Verizon though.
In total, during November and December their analysts visited 80 stores in 5 markets throughout the USA."
Posted to the site on 19th December 2006
