During yesterday's second quarter earnings call with investors, Sprint executives tried to gloss over the continued losses to the firm's ailing iDEN network. CEO Dan Hesse remarked that the company is committed to improving service levels on iDEN and that the network is performing at "the best levels ever."
But Sprint executives couldn't hide the fact that customers are still churning from iDEN at a rapid rate. At the end of second quarter, Sprint had 14.6 million subscribers on iDEN, down from 17.3 million at the end of first quarter. And don't be fooled, those iDEN subscribers aren't migrating over to PowerSource (phones that use both iDEN and CDMA). At the end of second quarter, Sprint had 1.7 million PowerSource customers, only slightly up from 1.4 million at the end of first quarter.
During the call, CEO Dan Hesse skirted questions about whether the company would consider selling its iDEN business. Hesse diplomatically said that he would consider all potential offers on the table and not discount any without further review. Clearly something needs to be done to fix the problem and analysts such as Walter Piecyk of Pali Research believe that it's inevitable that Sprint will sell its iDEN network. In fact, Piecyk said that yesterday's announcement by Sprint that it plans to make an offering of $3 billion in cumulative perpetual convertible preferred stock is another sign of iDEN's imminent sale. Piecyk says that the convert deal will offer added liquidity so Sprint can sell iDEN and prevent debt from being transferred to the acquiring company.
If Sprint is preparing to sell iDEN, who would be the potential buyer? I suspect there is an opportunity here for some savvy firm that is willing to cater to the prime Direct Connect customers that Sprint seems unable to maintain. I'm talking about those blue collar professionals that Nextel carefully selected back in the early 90s. Any ideas? --Sue