The Sprint to Customer Transition: Will Slow and Steady Win the Race?
Bobby is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sprint (NYSE: S) recently announced it will discontinue services for business and other organizations on its iDen Nextel National Network by June 2013. The company plans to move businesses currently receiving services through iDen to Sprint Direct Connect, which is part of the company's updated network, Sprint 3G CDMA. With updated services such as push to talk, broadband services, and industrial handsets made to withstand harsh weather and various climate changes, the company hopes to attract even more business while maintaining current accounts.
Sprint 3G CDMA falls under the company's planned network updates, which it calls Network Vision. These updates will hopefully help the company reduce costs while providing better services and products to customers.
Network Vision
Sprint's Network Vision is a planned series of network updates aimed at expanding current coverage and offering additional products and services. The overall goal of these updates is to make the Sprint network easier to manage and more cost effective. Expanding coverage into other regions such as Latin America (Brazil, Argentina, Chile) is all part of these network updates. The company hopes that by expanding coverage, increasing data speeds for sending and receiving information, streamlining customer service, and providing better, longer lasting equipment, businesses and others in need of these products and services will look to Sprint first instead of the competition.
Making the Switch
Moving businesses and other organizations currently using iDen products and services will take an effort on Sprint's part. The company has already sent out notifications to all existing customers along with an updated service plan and product lists for Sprint Direct Connect. The company has also stopped selling products and services compatible with iDen.
Investors should watch closely to see how the transition goes to determine if the company values its current customers as much as new ones. Unfortunately, in some cases, companies do not try hard enough to retain existing customers because of the costs associated with transitioning them to new networks and plans. Instead, companies focus on recruiting new customers with the hopes of recouping any losses from the failure to keep existing customers.
I think Sprint is making the transition in the best ways possible by informing businesses, offering assistance in transitioning from one plan to another; offering product and service advice, and giving customers time to make a full and complete transition by keeping iDen operational until next year.
The Bigger Picture
Business expansion seems to be the one of the key business goals for most telecom companies this year. Sprint's Network Vision plan is just one of many introduced by these companies. Telecom companies like Windstream (WIN) continue expanding their services into new territories, while other companies like Verizon (NYSE: VZ) have plans to revamp existing services to introduce new plans and payment structures for services like FiOS high speed Internet.
The reasons for all this expansion in the telecom industry are increased customer demand for faster, more reliable service, access to better technology, and the potential for increased profits. For example, Sprint announced the company will offer a variety of new handsets from Kyocera and Motorola including the DuraMax and DuraPlus and the Admiral (Motorola). These companies have a solid reputation for building equipment that lasts.
All this activity should make investing in telecom right now very exciting for investors. I think investors should be mindful of too much expansion, too fast, however. Making sure companies take the time to expand without inconveniencing existing customers is very important. After all, existing customers are still paying customers.
Other telecom companies like Frontier (NASDAQ: FTR)have also expanded into new territories. After acquiring territory in Oregon from Verizon, Frontier has spent over $49 million in service upgrades. Similarly, CenturyLink (CTL) expanded Prism IPTV service to territories formally held by Qwest. The two companies merged in April 2011. It remains to be seen what Sprint will do after it completes its Network Vision plan.
Customers and Competition
Both customer demand and increased competition keep telecom companies from becoming complacent in their product and service offerings. Finding new ways to improve service and provide only the best communication products on the market are essential to the survival of these companies. Investors, in addition to reviewing the overall health of a telecom, should also consider the company's telecoms partner with. These are companies that provide equipment, additional services, or funds to complete expansion projects. If partners cannot supply the items and services needed to a telecoms customers on a consistent basis, then customers will look elsewhere.
Investors should see Sprint's Network Vision as a step in the right direction. The company has had its share of ups and downs over the years, but if it keeps focusing on providing the best products and services possible along with expanding into different regions around the world, the company will remain profitable. For example, Argentina has a high percentage of those that already rely on mobile phones and a growing interest in mobile Internet.
I would encourage investors to learn more about the regions Sprint has chosen for its expansion. Some regions may end up yielding more profit than others, so investors should be a little concerned if the company chooses to spend lots of money in a region with smaller profit potential.
Looking Toward the Future
For any business to remain competitive, it must invest in the right equipment. As more and more people work remotely or from a job site or outdoor location, equipment such as handsets with push to talk features and heavy-duty protective cases are necessary for some employees to do their jobs. Sprint's goal seems to be to streamline the buying process for these businesses by providing services and products to suit these needs. By providing both, I think Sprint is hoping to become a one-stop-shop for these types of businesses. Updating the network and slowly moving customers over is just the first step in being able to become the 'go-to' company for businesses that require this type of customer service.
BobbyFisher has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
