with Matt Carter, head of Sprint's wholesale and machine-to-machine units
In February, Sprint Nextel (NYSE:S) created a new business unit called New Ventures to focus on new business models and product initiatives for wholesale and international markets. Sprint is kicking off its New Ventures initiative with the launch of open platforms Mobile ID and Mobile Zone, touted as white-labeled versions of the operator's Sprint ID and Sprint Zone applications for Android phones. The president of New Ventures is Sprint veteran Matt Carter, who also heads Sprint's wholesale and machine-to-machine units. FierceWireless Editor Phil Goldstein recently spoke with Carter about Sprint's forthcoming LTE wholesale business, New Ventures and Sprint's place in M2M.
FierceWireless: You said in March that Sprint had signed wholesale LTE contracts with at least 10 customers. Can you give me an update on how many customers Sprint has signed to wholesale LTE deals?
Carter: Let me be real clear about what that is. Essentially, we have a plethora of customers who are all interested in our 4G offering. We have put into place contract amendments to have the ability to provide them with LTE services when those are available. We have signed double-digits number of customers in terms of being able to offer them an LTE service when it becomes available.
FierceWireless: What kinds of companies have signed these arrangements and when might they announce them?
Carter: I can't tell you specifically the companies for competitive reasons, but I think you can perhaps deduce the usual suspects of customers that are in our space that would be interested in a 4G service. And it ranges across the board from MVNO customers to CLEC customers looking to get into some aspects of wireless. It ranges across the board. It represents a wide variety of the customer base we have today.
FierceWireless: Clearwire has obviously been doing wholesale for a long time. Sprint is a Clearwire wholesale customer. Clearwire recently signed some new customers, including NetZero and FreedomPop. Do you see yourselves in any way competing with Clearwire for wholesale business?
Carter: Not necessarily. We offer a much broader range of products and services. So, for us, we're not out just selling 4G. We're really selling a wide range of products and services. So, it's the traditional MVNO services that we provide, and the traditional wireline offerings that we provide, and it's just another component with 4G services. I think we compete very differently in terms of what we provide. View us much more as a full-service shop versus Clearwire, which is much more focused around a limited product set.
FierceWireless: Would Sprint look to add more network-hosting agreements, like it had with LightSquared, as it moves into launching LTE and Network Vision?
Carter: If the opportunity was available, we certainly would look at more network-hosting opportunities. Certainly, that is an area that we would clearly like to participate in. We believe that is a good business. We feel we bring a level of expertise to it.
FierceWireless: Since Sprint is launching LTE service in a 5X5 MHz nationwide block of spectrum, does the company have enough capacity to launch both its own LTE services for Sprint customers and handle the traffic from wholesale customers?
Carter: That's a very good question. It's obviously something that we have to balance. When you look at our wholesale customers, many of them ... would not need as much capacity to do what they are looking to do, versus us and the data and all of the stuff that people are looking for from our retail side. We think we can accommodate both well. It's certainly something we will keep an eye on to ensure a healthy balance between what we're providing our customers and what we have to do for our retail business.
FierceWireless: I know last year you said Sprint wanted to grow its wholesale customer base. How do you plan to grow that base? Is there a goal for growth in 2012?
Carter: Absolutely there is. We have very specific targets around revenues, gross margins and subscribers. As you know from our fourth-quarter results, wholesale contributes a significant amount of overall company net adds [954,000 out of 1.6 million total wireless customer net additions in the fourth quarter of 2011]. Wholesale gives the company an opportunity to participate in the broader opportunity out there in the marketplace, and we want to continue to grow that. We are looking at opportunities with a global customer base who are looking to target their customers who are based here in the United States. We see a real opportunity to continue to position wholesale as a growth business.
FierceWireless: What has the response been to Sprint's white-label Mobile ID and Mobile Zone initiatives so far? What kind of customers is Sprint targeting with those offerings?
Carter: The response has actually been really very positive. Think of what we're trying to do here. We spend a lot of money on innovation and developing products and services that can be leveraged with other carriers domestically and internationally. Those products in particular are services that customers have found very attractive--the opportunity to customize and create packs that appeal to their customer base. The team is out, literally, talking to a host of customers around the world, and it's been a good response.
FierceWireless: So is the primary target other wireless carriers?
Carter: Primarily, yes. Targeting wireless carriers to help them. One of the things a lot of [wholesale] customers are challenged with, as you know, is churn. They're trying to create stickiness, and keep their customers, and incrementally provide some additional ARPU. We're helping to bring a solution or a product that we believe can help them with that particular issue. It's not all inclusive. It's just one piece. But it's one that they have embraced and have said, "We like this idea, we like this product. Let's give it a shot to see if we can create more stickiness with our customers and incrementally more money with our ARPU."
FierceWireless: Given AT&T and Verizon's larger scale, won't they always have an advantage over Sprint in M2M? Don't they already provide many of the same services New Ventures offers?
Carter: The answers is no. Part of what you have to look at with machine-to-machine and New Ventures is it's not just about providing connectivity. That's one basis of where you can play, to say we can provide you a connection to our network. What we're actually finding, and what we believe is where the sweet spot is, is that customers, by industry, are looking much more for a total solution.
One of the challenges that I think AT&T and Verizon both have is that they're playing the connectivity scale. The connectivity scale is really a commodity business. It becomes more about price. That's not really where we want to play. We want to move up the value chain--how do you create greater profitability in providing a more complete solution, and maybe a more complex solution, that we can bring that creates better stickiness with a customer? We believe that we have to differentiate vis-à-vis Verizon and AT&T. Where they're playing is an easy, low-hanging fruit. We'll provide a connection. But we believe that we have to bring to the part is a much more complete solution.
What we announced with Chrysler is a perfect example of where we believe the opportunities lie. [Sprint Nextel announced it will be a strategic wireless partner for Chrysler Group's Uconnect voice-activated vehicle communications system.] We bring a lot more ecosystem partners together, blending that together and creating a much more integrated and integral solution set that makes it then much more valuable to our customer base.
FierceWireless: Sprint in January said it would merge its consumer and enterprise sales and marketing divisions. How has New Ventures been affected by those changes?
Carter: We've been given expanded responsibilities. So today, my team has a global wholesale piece. We have machine-to-machine. And we have New Ventures. It's much more integrated. There's a recognition by Dan Hesse that this is an area of growth, and he wanted to create clarity, focus, transparency. So for us, we've been affected by just getting more work [laughs]. And that's a good thing.