Sprint Nextel Corp., the embattled Reston telecommunications provider, is dusting itself off and gearing up for the future.
It’s been a rough year for Sprint, which took a loss of $192 million in the first half of 2007.
Shares of Sprint took a steep dive this month, falling 20 percent since July 20 to $18.26 yesterday. The company has struggled with its 2005 merger with Nextel. The incompatibility of the two networks (Sprint’s CDMA and Nextel’s iDEN) created a major obstacle in the merger, and the combined firm has had trouble marketing to consumers.
“The merger has not been executed well,” said Kent Custer, an analyst at A.G. Edwards & Sons Inc., a St. Louis-based financial services firm.
“Nextel has had its problems with capacity constraints and product pricing and they have been moving a lot of the people around,” he said.
In addition, the high level of competition in the industry and a turnover rate of 3 percent for core subscribers has placed extra pressure on the telecommunications giant.
Quite a few Sprint users were lost when Apple’s sleek new IPhone was introduced on the AT&T network.
But Sprint is not dwelling on the past.
The company has been investing heavily into its newest business venture: a WiMAX initiative called XOHM (pronounced ZOAM).
The company boasts that the unreleased fourth-generation wireless network will allow users to access the Internet on their mobile devices at broadband speeds of 2-to-3 megabytes per second, more than five times faster than the current network.
“This is a year of investment for our company,” said James Fisher, a spokesman for Sprint Nextel.
“Rather than focusing on business growth, we’re working to improve some of the basic challenges we are facing as a company,” he said.
Sprint plans to invest nearly $5 billion on its new WiMAX technology by 2010 and hopes to reach 100 million customers by the end of 2008.
“This has the potential to be a game-changing network,” said Chris Larson, an analyst at the Credit Suisse Group, a Zurich-based financial services firm.
“It’s a really good technology and it has the ability to help differentiate itself from its competitors,” he said. “But we’ll only know when we get there.”
Financial analysts like Mr. Custer are skeptical. He said that Sprint is losing its momentum by investing in future technologies, a big disadvantage in the highly competitive telecommunications sector.
“[Implementing a new technology] is like starting a car for the first time: You have to make sure that the tank has gas and there is oil in the engine,” said Mr. Custer.
“Sprint is going to have to spend a lot of money on marketing and branding and those expenses may hold them back.”
Yesterday, shares of Sprint Nextel Corp., fell 6 cents on the New York Stock Exchange.