Where have all the iDEN customers gone at Sprint Nextel? We see little evidence that Sprint Nextel even has an iDEN business, and that was reflected in the company's dismal third quarter results, which included a 52 percent drop in profits and a spike in churn. Sprint's base of postpaid subscribers actually shrunk by 188,000 because of defections by customers using the Nextel-branded iDEN service. These subscribers, historically the cash cow for pre-merger Nextel, are in fact defecting at an alarming rate. Research firm Technology Business Research (TBR) estimates the operator's Nextel-branded iDEN subscriber base, not counting customers it acquired from Nextel Partners, stands at almost exactly the same point it did when Sprint and Nextel completed their acquisition in August 2005.
Did things get so bad for these customers that they were willing to go to competitors that have inferior push-to-talk technology? For years I've touted the advantages of Nextel's iDEN network, namely a high-quality PTT service with a cult-like following that resulted in industry-leading ARPU. When competitive PTT offerings came on the scene in 2003, they had little impact on Nextel's subscriber base or customer growth. Fast forward to 2006, and Sprint Nextel's story is about Boost Mobile prepaid additions and an apparent de-emphasis on marketing to the enterprise user--the most coveted user in the industry.
Sprint executives told Wall Street after the second quarter's bad results that they were intentionally reducing Boost's rapid growth, partly because its customers were putting a strain on the iDEN network. If forced to choose, they would rather provide good service to existing and new subscribers to the higher-priced Nextel-branded service. Yet, Boost subscribers led the way in the third quarter with 216,000 customers, allowing Sprint to come out with a positive customer growth. All the while, iDEN enterprise users fled.
Sprint is in a bad position going into 2007 as it works with public-safety agencies to reduce interference between its iDEN network and government radios. This rebanding effort is reducing the volume of calls that the iDEN network can handle. In fact, TBR's John Byrne expects Sprint to see continued iDEN defections as it faces network capacity problems in many large U.S. markets in 2007.
Meanwhile, we can also ask where have some of the key former Nextel decision-makers gone? Executive Chairman Tim Donahue and former head of Nextel is stepping down at the end of the year. Considered one of the leading operating executives in the industry, Donahue was the one who breathed new life into Nextel, which was considered doomed to failure just five years ago. One can only imagine his frustration level at the demise of the empire he built. Interestingly enough, Sprint amended CTO Barry West's employment agreement this past summer. West is another star from Nextel. The new employment package provides an incentive for him to stay until February of next year. West is now in charge of Sprint's WiMAX development.
Could this be the end of the Nextel powerhouse?
On another note, check out this article from Wireless Week. It's about mobile-phone analyst guru Herschel Shosteck. Shosteck, who was analyzing the cellular-phone industry even before there were any licensed operators, recently retired from the firm he founded, The Shosteck Group, due to a recurrence of cancer. CEO Jane Zweig will continue to operate the company. I've had the pleasure over the years to interview Mr. Shosteck many times, and I always came away educated and entertained. I wish him a speedy recovery. -Lynnette