with Sprint CEO Dan Hesse
Sprint Nextel has been at the center of a number of events in the wireless industry, including the introduction of the Palm Pre and webOS, the inking of a major outsourcing deal with Ericsson and, most recently, its acquisition of Virgin Mobile USA. That's not to mention the carrier's second quarter results, which show continuing postpaid subscriber loses and dwindling profits. FierceWireless Associate Editor Phil Goldstein spoke with Sprint CEO Dan Hesse after the carrier's earnings announcement about Sprint's recent moves and its place within the U.S. wireless industry.
FierceWireless: Does the acquisition of Virgin Mobile and the focus on prepaid mean Sprint is going to have to shift resources away from maintaining and growing its postpaid customer base?
Hesse: Absolutely not. We see the prepaid segment as one that's growing. Boost [Mobile] has had a couple of very good quarters, and we want to be in a position to take advantage of the segments of the industry that are growing, like prepaid. So actually, this is an acquisition of new additional resources in the purchase of Virgin Mobile. It's not a shifting of resources away from postpaid.
FierceWireless: Is Boost's distribution push, especially its retail expansion, going to continue in parallel?
Hesse: Yes. We have a Boost strategy, we're continuing with that. The Boost team is performing very well, and I expect them to continue to do so. And once the transaction is closed with Virgin, they'll reevaluate what makes the most sense in terms of those two businesses moving forward. We think it's great to have two brands.
FierceWireless: So you are committed to keeping both brands and keeping the networks separate?
Hesse: The networks are a separate issue. At Sprint we have the iDEN network and we have the CDMA network, and Boost operates on both CDMA and iDEN. Virgin only operates on CDMA. So the current plan is, yes, we will keep both brands active in the market, and that was a very conscious part of our decision to acquire Virgin. It was also to acquire the rights to continue to use the Virgin brand, because we see that as an asset to the Boost brand as well as the Sprint and the Nextel brands. The networks though, that's a separate issue. And what we will continue to do is evaluate what gives us the highest return on invested capital between putting dollars in CDMA and on iDEN. And as [Sprint's president of network operations and wholesale] Steve Elfman said on the call this morning, we're continuing to invest in both networks.
FierceWireless: What do you think the deal says about the state of the MVNO market?
Hesse: I don't think the deal really makes a statement in any way on the MVNO market. As a matter of fact, Sprint is getting ready to join the MVNO market as a customer for 4G, with Clearwire. As are the cable companies. So I think the MVNO market is actually a strong market going forward. As you know, we had a strong relationship with Virgin for a long time, and we saw some special synergy opportunities where one plus one can equal three by bringing the two businesses together, because they do operate on a Sprint network platform. So I would look at it as separate.
FierceWireless: Are there any other specific steps that Sprint will take to decrease churn and get back to adding postpaid subscribers?
Hesse: It is important for perception to catch up to reality--and that does happen, month after month, quarter after quarter. So when I talked about the results this morning on the call, perhaps the element that I was most pleased about is that the reality of what we provide in terms of the value proposition and customer experience--18 consecutive months now, where each and every single month customer satisfaction, with the care experience and with first-call resolution, has improved. Both the CDMA and iDEN networks are operating at their best levels ever, and it's being recognized independently. PC World did a 13-city test where they said our 3G network is more reliable than Verizon's or AT&T's.
So the most important thing is to continue to move the ball on the reality, because there is a lag, but perception does follow reality. So actually improving the reality is the most important thing, and that will take time. Now on top of that, there's clearly a lot of things that can be done to improve the customer numbers. The trends have been improving, they've been gradually improving, and we expect them to continue to improve, and gradually to see positive subscriber growth for the company. Examples of those things are new devices. Devices are becoming more important, so we've launched the Pre and the BlackBerry Tour. And we will have other new devices being launched in the second half of this year that we hope will also help. And the real differentiator we think in those markets where we launch it will be 4G. We'll be the only 4G carrier, and we think that will not only provide new subscribers for 4G, but will give us lift in our 3G business as well....Continued