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Archive for Tuesday, February 15, 2005

Sprint plans to keep focus on wireless business

February 15, 2005

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— Sprint Corp. was unfazed Monday by Verizon Communications Inc.'s announcement that it plans to buy MCI Corp.

Focused on its own merger -- a $35 billion deal with Reston, Va.-based Nextel Communications Inc. -- Sprint said the latest round of contraction in the telecommunications industry wouldn't force a change in its strategy to base its future around cell phones instead of land lines.

"We like the hand we're playing," said Scott Stoffel, a spokesman for Overland Park-based Sprint. "Our focus is on executing our 2005 plan and that's our merger with Nextel."

Verizon's decision to buy MCI comes two weeks after rival SBC Communications Inc. said it planned to merge with AT&T Corp.

Both moves, if approved by regulators and company shareholders, would provide Verizon and SBC with nationwide systems for transferring voice and data and the clout to go after major companies previously unwilling to trust their telecommunications needs to a regional player.

By contrast, Sprint plans to spin off its local phone service business once the Nextel merger is complete. The company also has distanced itself from long-distance -- at least outside of the business arena -- by cutting back long-distance marketing to consumers and writing down the value of its long-distance assets.

Company officials, including chairman and chief executive Gary Forsee, have said repeatedly that Sprint would be a wireless provider first. With Nextel, Sprint will be No. 3 in the wireless industry, close behind market leaders Cingular Wireless and Verizon Wireless. SBC owns 60 percent of Cingular.

Industry observers were conflicted over whether such a wireless-centered strategy would be the way to go in the face of the industry's giants investing further in wire-based assets.

Phil Redman, an analyst with telecom research firm Gartner Inc., said he felt Verizon and SBC were finally catching up with Sprint, which has had a nationwide wireline network for years. He added the regional phone companies don't have the best reputations for customer satisfaction, which Sprint could use when competing with the much larger companies when selling services to businesses.

"All of the sudden, if you're an enterprise, are you going to feel comfortable going to a Verizon or SBC as opposed to Sprint, who has worked with enterprise for a while?" he said. "If I were them, I'd get my marketing folks on that ASAP. That's a great niche."

But Lisa Pierce, an analyst with technology firm Forrester Research Inc., said Verizon and SBC were sending a message to business customers that while wireless is a growth sector, they realize businesses, especially data-intensive ones, still rely heavily on wireline services.

"I was talking to one of (Sprint's) biggest business customers and they said they need to see a commitment from Sprint that it will continue supporting and innovating landline or they'll probably move the whole thing over to Verizon," she said. "(Verizon and SBC) are clearly buying into this to invest in the enterprise business. They've done a volley and now we're waiting for a response from Sprint."

Sprint shares declined 19 cents to close at $23.12 Monday on the New York Stock Exchange.

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