Bloomberg News

Sprint Targets Wholesale-Customer Growth of at Least 10%

November 13, 2011

(Updates with closing share price in seventh paragraph.)

Nov. 11 (Bloomberg) -- Sprint Nextel Corp., the wireless carrier that posted four straight annual losses, is accelerating an expansion into the wholesale business to offset contract- subscriber defections from its own brands.

Sprint has more than 100 customers reselling its network capacity and plans to increase that number by at least 10 percent in the next year, Matt Carter, president of Sprint Wholesale Solutions and New Ventures, said in an interview. Sprint has 6.3 million wholesale and affiliate subscribers.

The carrier is seeking new revenue sources after losing contract subscribers for four consecutive years amid competition from Verizon Wireless and AT&T Inc. This year, the wholesale business has emerged as Sprint’s main generator of new subscribers. To spur growth further, the division has started providing wholesale customers with more services.

“We are kind of a factory that produces these capabilities,” Carter said. Customers include Leap Wireless International Inc. and Cablevision Systems Corp. In mid-2012, XO Communications LLC will start reselling Sprint’s services to small and mid-sized businesses.

In the quarter ended in September, the division added net 835,000 wholesale and affiliate subscribers, almost twice the number of subscribers Overland Park, Kansas-based Sprint gained for its own brands. A year ago, the wholesale division’s subscriber additions trailed gains by Sprint’s brands.

Last quarter, subscribers on monthly contracts -- the most lucrative customers in the wireless business -- fell by 44,000, more than analysts estimated.

Retailers, Foreign Carriers

Sprint rose 2.5 percent to $2.91 at 4:15 p.m. New York time, and has lost 31 percent this year.

To expand the reselling business more rapidly, Sprint has started offering a broader array of services, such as billing, marketing support and competitive analysis, Carter said. In the past, Sprint would just let customers tap into its network capacity, offering few additional services. The new strategy is also designed to boost the division’s margins.

“Sprint is looking at any and all opportunities,” said Michael Nelson, a Mizuho Securities USA Inc. analyst in New York who has a “neutral” rating on the stock. “It’s incremental to their existing retail business.”

The extra services are also aimed at attracting new types of resellers, such as international carriers and retailers.

“We are absolutely going after different customers,” Carter said. “The strategy of enablement is a new approach to the marketplace.”

‘Sticky Point’

A Chinese wireless carrier Carter declined to name is already a customer. When its subscribers travel to the U.S. for prolonged stays, they can get Sprint’s handsets and service under the Chinese company’s brand. About 115,000 Chinese come to the U.S. to stay for six months or more annually, Carter said.

“We are seeing a ton of opportunity with international operators,” he said.

Supermarket chain Kroger Co. uses Sprint to offer an array of mobile phones and plans, and to run a related loyalty program -- an approach that more retailers are adopting, Carter said. Its mobile-phone customers earn free call minutes for shopping at participating Kroger stores.

“Retailers view cell phones as a sticky point, to keep their customers coming back,” Carter said. “We view retail as a really big area of opportunity.”

--Editors: Ville Heiskanen, Cecile Daurat

To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus