Cable's principal wireless-phone partner, Sprint Nextel, is having a tough time.
It's losing subscribers. Lots of them. About 108,000 were lost in the fourth quarter, with an expectation of subtracting another 1.2 million in the current (first) quarter.
This at a time when wireless is highly penetrated (above 80%) but still growing: the U.S. subscriber count was 243.4 million in June 2007, up from 219.6 million a year earlier, trade group CTIA-The Wireless Association says.
Number portability has made it easier to switch carriers, and Sprint's monthly churn is holding steady, at about 2.3%, while AT&T and Verizon's bigger wireless businesses are improving their retention rates, analysts say.
Sprint also had a shocking financial net loss of $29.5 billion in Q4. It wrote down the value of its big acquisition, Nextel, by $30 billion. Nextel's a company Comcast thought about buying at one time, after Brian Roberts fell short in his quest to buy The Walt Disney Co. Count that as a bullet dodged. Cross-network marriages are so hard to pull off.
Expectations for Sprint are now so low that Sanford Bernstein analyst Craig Moffett called it “a performance of some heroism” that Sprint somehow managed to disappoint “on virtually every metric” in Q4.
What's Sprint's problem? Does it lack a hot gizmo that can counter AT&T's exclusive network deal with Apple's iPhone? Does it need a mascot tough enough to knock out Verizon's can-you-hear-me-now guy and his network hordes?
Actually, Sprint mostly has itself to blame, according to analysts, quality surveys and even the CEO, Dan Hesse, on the job in Overland Park, Kan., since December.
The company that used to tout its pin-drop quality now confesses to poor customer service. Hesse says he's changing that, adapting Ford's old slogan in a BusinessWeek interview: “Customer service is job one.”
A declining subscriber base. Low marks in J.D. Power surveys. This doesn't seem like the ideal mobile service partner for Comcast, Time Warner and other big cable operators to have picked as a 20-year venture partner. Except maybe to look good by comparison.
Hesse told BW that Sprint tried to do too much after buying Nextel — hatching plans to spin off local phone operations, delving into WiMax and joint-venturing with cable companies. Management couldn't maintain focus, he said.
I say the cable JV couldn't have been that much of a distraction. It hasn't been for the cable operators, who barely if ever mention it. In November, Sprint froze the rollout of the “Pivot” mobile service at the current 33 cable markets, Multichannel News's Todd Spangler reported. Cable heaved a collective yawn.
Given Sprint's troubles, cable was wise to concentrate on voice-over-Internet protocol customers — which extends the existing broadband platform — and not force the issue on mobile. The VoIP business continues to be a good one for cable, even with the availability of free alternatives, such as Skype, and with more people replacing landlines with mobile phones.
Cablevision's impressive fourth-quarter results include the news that its voice product has penetrated 34% of available homes. VoIP sales have helped the cabler increase revenue per customer, despite fierce competition from Verizon FiOS TV.
Cablevision also added basic subs in Q4. Without a mobile phone business to attract or retain them.
Moffett had an interesting report Friday on Sprint's cable partner Comcast and its priorities. Wireless, no surprise, has moved down the list.
In fact Comcast sees itself more as an application provider — via on-demand content from offerings like Fancast — on a Google-favored open wireless network than as a wireless-network provider.
Comcast is focused on commercial services (now only 1% of overall revenue); on adding more HD options (including VOD); and on bonding channels together to sell higher Internet speeds, especially after it reclaims analog channels, Moffett wrote after meeting with CEO Roberts and chief financial officer Mike Angelakis.
Sprint, meanwhile, is looking to “simplify” pricing for its 54 million customers and making it possible to switch plans without extending service contracts, Hesse said on the earnings call last week. Hesse feels Sprint's data network is superior to rivals' and the all-in $99 plan could help keep heavy users happy.
Hesse concedes 2008 will be rough, though, and foresees “many quarters” before a financial turnaround.
That's one long Pivot.