If you've been working in the wireless industry for the past decade you might remember the time when Nextel Communications catered to a lucrative user base that loved its push-to-talk service operating over its iDEN network. These loyal Nextel users typically were in public safety, construction and other fields where short bursts of communications were necessary to the job. Nextel sported some of the highest average revenues per user figures and lowest churn numbers in the industry because of its loyal subscriber base. Before it was purchased by Sprint in 2005, the company had more than 20 million subscribers.
Today Sprint Nextel (NYSE:S) is desperately trying to stop its remaining 5.67 million (as of the fourth quarter of 2010) iDEN subscribers from leaving. The company is in the midst of a network modernization project that includes plans to migrate iDEN subscribers to CDMA and eventually shut down the iDEN network around the 2013 timeframe.
Yesterday, Sprint provided some more details on its plans to launch a new push-to-talk service on its CDMA network in the fourth quarter. The new Direct Connect service will be an upgrade to the existing QChat technology from Qualcomm (NASDAQ:QCOM) that Sprint deployed in 2008 using its EV-DO Rev. A network. Although Sprint's initial QChat phones included a range of new features, including a repeating alert and group chat function that connected up to 20 users at once, they were never a hit with subscribers. At a press briefing at Mobile World Congress in Barcelona, Spain, last month, Sprint Senior Vice President of Networks Bob Azzi said the original QChat did not work as well as iDEN, and customer adoption rates were "short of what we had hoped for."
Can this new, improved QChat PTT service stop the remaining iDEN subscribers from leaving? Sprint said the new Direct Connect service will offer improved in-building coverage and will triple the square-mile reach of its current iDEN-based PTT service. In addition, the company is hoping that its portfolio of new PTT devices from Motorola Mobility (NYSE:MMI) and Kyocera also will appeal to iDEN subscribers. The gadgets will support group PTT for up to 200 participants as well as high-resolution cameras and Bluetooth--and Sprint promised at least one Android-powered smartphone, a key component considering the current popularity of smartphones. Sprint said additional PTT devices are on the roadmap for 2012.
According to Roger Entner, analyst with Recon Analytics, Sprint has no choice but to offer its remaining iDEN subscribers a transition path to CDMA, otherwise it runs the risk of having them defect to Verizon Wireless (NYSE:VZ) or AT&T Mobility (NYSE:T), both of which offer competitive push-to-talk solutions. "If they don't offer them a transition path, they are up for grabs," Entner said.
Will AT&T and Verizon Wireless exploit this opportunity to grab Sprint's remaining iDEN subscribers? That's definitely possible, especially in today's competitive wireless environment. However, Entner believes that most of Sprint's iDEN subscribers who were willing to leave Sprint have probably already defected to the other operators. "The people who remain are happy with Sprint, and if they can get something comparable, they will stay," he said. --Sue