WASHINGTON (Reuters) -
Sprint Corp's newly appointed Chief Executive Marcelo
Claure has so far had a Midas touch in the telecoms
industry, turning Brightstar, a reseller of U.S.
handsets to Latin America, into a distributor valued at
$2.2 billion when it was sold to Japan's SoftBank.
But his talents will now be put to the test like never before as he
must complete the No. 3 carrier's network upgrade while trying to
retain customers, who are defecting in droves.
"We are talking about billions of dollars of capital spending in
front of this company before the network is ready," MoffettNathanson
analyst Craig Moffett said, noting that Sprint likely has to cut
prices to compete with the industry's top players.
"Unfortunately raising capital spending and cutting prices at same
time is recipe for a very ugly financial situation."
Some analysts fear that Sprint's decision to give up its dream of
merging with T-Mobile US Inc <TMUS.N> could lead to a wider price
war as the top carriers slug it out in a nearly saturated market.
"Without the ability to compete on scale they are going to have to
compete on price, so the two smaller competitors may become
increasingly desperate to maintain market share and could become
irrational in pricing, which could cause disruptions in pricing in
the industry," said Mark Stodden, analyst at Moody's Investors
Service.
Sprint might follow the lead of T-Mobile, which added more
subscribers than all of its competitors combined in the first
quarter through aggressive promotions and campaigns that addressed
customer frustrations with the industry.
"Sprint could take the same road and try to compete more
aggressively on price, which could have the effect of restarting
subscriber growth," said Matthew Goodman, analyst at ITG Investment
Research, who saw few short-term alternatives.
SUPERIOR NETWORK IN THE WORKS
Sprint, long the industry's technological weakling, has not been
sitting on its laurels. It has invested $5 billion to upgrade its
much maligned network in a transformation likely to trickle down to
customers by the end of next year.
Sprint's new network should allow the company to combine the vast
and spectrum it obtained from a 2013 acquisition of Clearwire Corp,
with its other radio wave holdings. This has created a superior high
speed offering known as Sprint Spark, which analysts say should be
the best in the industry.
Still, even more investment is needed to make Sprint's network
competitive with those of other top carriers. Spark is only
available in 24 cities, and its goal is to reach 100 U.S. cities by
2016.
The challenge will test the abilities of Claure, a Bolivian-born
billionaire who got his start distributing cellular handsets from
U.S. manufacturers in Latin America. Brightstar, which he founded in
1997, distributes phones to companies in the United States and
elsewhere. SoftBank acquired the company in January.
"They still obviously need a lot of network expertise and they have
that. But having someone in charge who is more marketing-oriented
coincides with the chief executive of SoftBank's outlook," said Bill
Menezes, an analyst at Gartner, referring to Japanese tycoon and
Sprint Chairman Masayoshi Son.
"Masa is known for innovating pricing and marketing in Japan. He
needs people to make Sprint their first consideration," said Menezes.
Claure will have to shed Sprint's image as a lower-quality provider
at a premium cost. But discounting, especially to add market share
as the new network is being phased in, is likely to reduce profit
margins as well.
While AT&T Inc and Verizon Communications Inc have established
reputations and T-Mobile has been plugging away at its "Un-carrier"
brand for a year, Sprint has struggled to communicate what it stands
for, said Jan Dawson of Jackdaw Research.
"Perception tends to lag reality by good couple years," said Dawson.
"Non-customers really have a poor sense of network quality. Even if
Sprint starts to deliver better performance, it will take time for
people to realize that," he said.
(Reporting by Marina Lopes; Editing by Richard Chang)
