Industry Voices — Moore: A farewell to Sprint

Sprint sign MWCLA19
Dan Hesse was Sprint CEO during 2007-14.  In quarterly employee meetings, Hesse used to liken Sprint to a hospital patient, recovering from a deadly disease. (Monica Alleven/FierceWireless)
Jeff Moore Industry Voices

Very soon, the Sprint brand will be gone from the U.S. telecom market. “On August 2, we’re combining our Sprint and T-Mobile brands to operate as one T-Mobile brand nationwide,” T-Mobile CEO Mike Sievert said on July 22.

This wasn’t supposed to happen. At its height in March 2006, Sprint’s market capitalization was $76 billion. This was in the aftermath of Sprint’s $35 billion acquisition of a national competitor, Nextel, in 2005. As of 2005, Sprint was the third biggest U.S. carrier and Nextel was the fifth biggest. The deal also gave Sprint a chunk of the prepaid market via Nextel’s Boost Mobile asset.

The years before were heady days for Sprint, which won a lot of mid-band spectrum at auctions in the 1990s. An early marketing pitch said, “Sprint PCS built the only all-digital, all PCS nationwide network from the ground up."

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During 1999-2005, Brian Baker – aka The Sprint Guy – appeared in a reported 155 TV ads for Sprint, as the nascent wireless competitor gained tens of millions of subscribers. Baker’s task was to rescue people from “bad cellular” as some competitors at the time were still using analog devices.

In this 1999 “Cellular Town” Sprint ad, The Sprint Guy travels around a town where he is the only one speaking clearly, as static distorts the speech of town residents. The ad closed with a pin dropping – indicating clarity of Sprint calls – and with the slogan of “The clear alternative to cellular.”

The Sprint Guy’s image was everywhere -- in advertisements, in stores windows, and in brochures. People magazine in 2001 named Baker as the “Sexiest Pitchman” and put him on their list of the “50 Most Beautiful People.”

Sprint traces its origins to the founding of Brown Telephone Company – a local phone company – in Kansas in 1899 and to the communication unit of the Southern Pacific Railroad, which used railroad rights-of-way to compete in the long distance market against AT&T.  A nationwide fiber network was built, and Sprint Corporation was founded in 1987 as a combined local phone company and long distance provider. Some may recall actress Candice Bergen appearing as “The Dime Lady” in Sprint commercials during the 1990s, pitching long distance at 10 cents per minute, as seen here.

Sprint LTD was a local dial-tone provider in parts of 17 states with a nearly 5% share of access lines. However, Sprint LTD began to decline after the year 2000, as customers began canceling dial-up lines and then “cut the cord” to use wireless for voice. Long distance became commoditized, so it was in decline as well, and Dime Lady commercials ended. Wireless became the company’s central focus.

Sprint’s decline

So what went wrong?  Forbes in November 2012 published an article entitled: “Was Sprint Buying Nextel One Of The Worst Acquisitions Ever At $35B?”  The article concluded that this was one of the worst deals in U.S. business history, albeit not as bad as the AOL/Time Warner deal.  

Sprint in 2004 hired an ambitious new CEO, former BellSouth executive Gary Forsee, and was looking to grow via expansion. Alltel was considered. 

Alltel had tremendous rural coverage, a great fit with Sprint’s strong urban coverage. Also, both networks used CDMA. Ultimately though, Verizon bought most of Alltel, and this move propelled Verizon – a carrier that did not even serve Oklahoma City – as the clear leader for nationwide coverage.

Sprint’s new iDEN network from Nextel was 2G, which was great for voice and text, but inadequate for video. This was at a time when the iPhone, 3G, and – within a few years – 4G took off.  Phones were becoming something you looked at, not something you talked into.

The iDEN and CDMA networks were not compatible, and the shutdown of the iDEN network was a clumsy process, as push-to-talk over Sprint’s mid-band spectrum lacked the propagation of push-to-talk over 850 MHz iDEN. There was also a clash of cultures, as Sprint’s starched-shirt culture clashed with the feistier, “get it done now” culture of Nextel.

Sprint was an early mover in 4G, but Sprint chose 4G WiMAX, which did not perform as well as LTE, and the broad adoption of LTE made a broader selection of devices possible.

Sprint was late to adopt the iPhone, which launched with AT&T in 2007 and then launched with Verizon in early 2011.  Finally, in late 2011, Sprint gained access to the iPhone.

By 2008, Sprint was on the edge of bankruptcy, as debt maturities, a major recession, and customer losses created financial strife. Then CFO Bob Brust put major effort into cost cutting, saying that "everything's on the table" as Sprint was cutting its costs and managing its debt, as detailed by Fierce Wireless in December 2008. I worked for Sprint at the time and recall the extremes we went through to cut expenses, including blocking access to a parking garage, saving $50K+ in electricity and upkeep costs.

Between the third quarter of 2007 and the third quarter of 2010, Sprint lost postpaid subscribers in every quarter. It was ugly. Dan Hesse was Sprint CEO during 2007-14.  In quarterly employee meetings, Hesse used to liken Sprint to a hospital patient, recovering from a deadly disease. Signs of improvement were there, including a return to customer growth and a marked improvement in customer care rankings.

However, during 2013-14, Sprint undertook an overhaul of its network, dubbed Network Vision. It did not go well.  During 2013 and the first half of 2014, Sprint lost more than 3 million customers, with most of these being Nextel customers, as detailed by Fierce Wireless in August 2015. I recall hearing about customers lining up at Sprint stores to switch to other carriers. The iDEN network was shut down in mid-2013 and this had issues as well. Sprint’s replacement CDMA-based push-to-talk solution was excellent, but it was delivered via mid-band spectrum, which lacked the excellent propagation qualities of Nextel’s low-band 850 MHz spectrum. Some customers no longer got an adequate signal and hit the door.

SoftBank arrives on the scene

Japan-based SoftBank acquired Sprint in July 2013, and in 2014, Hesse was replaced as CEO by Marcelo Claure, the founder of wireless services company Brightstar.  Claure also attempted a turnaround, promising switchers 50% off competitor rates for switching. Sprint gained retail space at 1,400 RadioShack stores and launched Direct2You, an effort at home delivery of cellphones. In 2016, former Verizon pitchman Paul Marcarelli was brought on board, saying he had switched to Sprint, and he dominated advertising during Sprint’s last four years.

"We will have the best network in the next two years," Claure told CNNMoney in a September 2015 interview. There was a plan to build out smaller cells largely on monopoles transmitting via Sprint’s abundant 2.5 GHz spectrum.  “Sprint lost $180 million on abandoned monopole network build-out plan,” per a September 2018 headline from Fierce Wireless.

The End

Perhaps the fatal blow was struck in August 2016. T-Mobile announced that it was completely focused on unlimited data plans. The following winter, Verizon and AT&T moved to focus on unlimited data plans as well. Unfortunately, unlimited data had been Sprint’s only real point of differentiation. In Sprint’s twilight years, the carrier could only focus on discounting, promising savings versus competitors. Amid mounting debt, this did not work out well.

RELATED: T-Mobile lays off hundreds of Sprint employees – report

Mistakes were many, and they ultimately amounted to Sprint’s demise. Still, the carrier will be missed. Sprint provided solid, affordable wireless service. The company was innovative, feisty, and competitive. Hopefully, that legacy will survive within the New T-Mobile.

Jeff Moore is Principal of Wave 7 Research, a wireless research firm that covers U.S. postpaid, prepaid, and smartphone competition.  Jeff has 25 years of telecom industry experience, including 13 years of competitive intelligence work for Sprint. Follow him on Twitter @wave7jeff.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.

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