Sprint outpacing its longtime rivals
Positions itself as primary competition for SBC, Bells
[in a number of ways sprint, a telecom, parallels ntop (and idt, a telecom, and level 3, a carrier -- which partner).
Sprint had its relationship with Worldcom, Ntop with AT&T.
Worldcom’s and AT&T’s debt load was excessive; the one filed for bankruptcy and the other is selling or shutting down or stopping growth in certain units, trying to keep an essential core (its business customer unit) intact.
Sprint acts as a carrier for Cablevision; Ntop manages cable telephony for cable msos with no experience in telephony. These cable msos bundle packages to avoid customer churn, get additional income to pay down debt, and achieve growth.
Ntop and IDT are also going add a focus on wireless/wi-fi]
By Jon Van
Tribune staff reporter
Published July 25, 2004
Sprint Chief Executive Officer Gary Forsee brought a marching band to the firm's campus outside Kansas City on Friday to say "thank you" to more than 8,000 employees.
"We wanted to make it fun," said Forsee. "Power Point wouldn't do."
It was a good week for Forsee and Sprint. The week was not so cheery for one of its key competitors.
Sprint's upbeat second quarter, in which it reported earnings of $233 million, up from $7 million a year ago, contrasted sharply with the gloomy financial outlook from AT&T. The one-time "Ma Bell" saw profit plunge 80 percent as sales dropped for the 18th consecutive quarter.
More critical, AT&T said it would stop seeking new customers for its traditional long-distance service.
As the telecom industry has started to emerge from a devastating three-year downturn, the old pecking order has been turned upside down.
As AT&T and MCI, the nation's top two long-distance providers, battled before courts and regulators over the onerous rates charged by the former Bell companies to use their lines, Sprint stayed in the background.
And with the battles largely over--and lost--those two carriers are struggling to define their futures. Sprint's future, meanwhile, has never looked brighter.
"Going forward, we're using our assets to compete in the framework of an industry that continues to change dramatically," Forsee said. "We're an integrated service company that's helping to redefine the industry."
Thanks to a strategy based on partnering with anyone interested in offering phone service, Sprint has become the primary threat to SBC Communications Inc. and the other Bells.
Besides its long-distance operation, ranked No. 3 nationwide, Sprint serves as the dominant local carrier for 8 million customers spread over 18 states. It offers services to business customers and operates a national wireless phone service.
On top of that, Sprint has teamed up with Time Warner, the nation's second-largest cable TV operator, to provide Internet telephony to customers. It is in talks with other cable TV firms for similar deals.
For traditional telephone companies, cable firms represent perhaps the biggest threat to steal market share. Customers can get bundled service from a cable operator that includes television, high-speed Internet and phone service.
Sprint is also finding partners to resell service over its wireless network. It already provides wholesale service to Virgin Mobile and Qwest Communications.
Even its long-distance rival, AT&T, will use Sprint's wireless network later this year to launch cell phone service once AT&T Wireless is merged into Cingular Wireless.
"There has to be some strategic benefit" before Sprint will enter an agreement, Forsee said. "We're not providing wholesale to just anybody."
Sprint's open approach to partnering served it well, said Terry Barnich, president of Chicago consultancy New Paradigm.
"Sprint says `let's have the party at our house' and provides access to customers for other players," he said. "That worked out better than trying to own the customers as AT&T and MCI have done."
Forsee said that as a smaller telephone company, Sprint has always seen the value of partnering. It started the Sprint wireless network in 1995 in partnership with some cable TV operators as investment partners.
By 1998 Sprint acquired its partners' interest to attain full management control of the network.
"We've displayed great partnering skills," Forsee said, with "the mindset that it's a win/win deal."
The consultant who worked with Sprint to develop the wholesale plan called it "a beautiful strategy."
"I talked to all the carriers about it," said Andrew Cole, vice president at A.T. Kearney. "The others didn't want to do it. Sprint did."
Life wasn't always so bright for Sprint. After years of being urged by Wall Street to merge with someone, Sprint agreed in 1999 to become part of WorldCom.
It was a near-death experience that Sprint escaped in 2000 when regulators in Europe and the U.S. scotched the deal.
"That was a lucky break for Sprint," said Jeffrey Kagan, a telecom consultant in Atlanta. "WorldCom would've sucked them right in."
WorldCom, which went bankrupt in 2002 after revealing more than $11 billion in fraudulent accounting, emerged earlier this year as MCI. That firm, led by Michael Capellas, has struggled with red ink and massive downsizing.
Still, like much of the telecom sector, Sprint faced difficulties brought on by excess debt taken on during the run-up in dot-com business, Forsee said.
In the last two years, management sold Sprint's lucrative Yellow Pages business and laid off workers to pare debt.
Last year when Forsee rejoined Sprint after working for BellSouth Corp., he concluded that Sprint's two main assets--a national wired long-distance network and national wireless network--could be used to competitive advantage.
He reorganized the company to focus upon customer service rather than product categories. The strategy worked.
The wireless business, which has suffered from customer defection, has recently seen its rate of "churn" decline.
Wireless now accounts for more than half of Sprint's total revenue.
Wireless has been the key to Sprint's success, said Pascal Aguirre, senior vice president at Adventis, a Boston-based consultant.
"To get firmly behind wireless was an inspired decision at Sprint," said Aguirre. "At AT&T, we saw the reverse, with AT&T spinning off wireless, largely for financial reasons, to preserve its balance sheet."
Of the three long-distance companies, Sprint "clearly had the most foresight," said Steven Titch, a telecom analyst with the Chicago-based Heartland Institute.
AT&T and MCI provided local phone service to consumers by leasing from networks owned by SBC and other Bells at government-mandated wholesale rates, triggering a constant battle over the rates.
Rather than join the fight, Sprint focused on wireless, Titch said. Now that government policy has shifted and wholesale rates for wired service are due to rise, AT&T and MCI must scramble to adjust, he said. |
