Wireless

Sprint Nextel said it will cut 2,000 to 2,500 positions in the fourth quarter in an effort to save $350 million.

The cuts will be completed by December 31.

According to a statement, Sprint will cut jobs across the company, including its wholesale unit and contractors. The company said the cuts won't impact customer service, something the Sprint has been trying to improve. Nevertheless, Sprint said call volume has decreased so it has discontinued 27 call centers.

Sprint will take a fourth quarter charge of $60 million to $80 million. The layoff news comes as Sprint will reportedly sink another $1 billion into Clearwire.

Read the original post of "Sprint to cut 2,000 to 2,500 jobs" at ZDNet's Between the Lines.

Clearwire investors are pumping in another $1.5 billion into the venture to help pay for the company's nationwide 4G wireless network, according to The Wall Street Journal.

The article cites two unnamed sources "familiar with the matter," who said that Sprint Nextel, Comcast, Intel, Time Warner Cable, and Bright House Networks have all agreed to contribute an additional $500 million to the cause. Google, which had initially invested with these other companies, is not participating in this funding round, the article said.

Sprint and these other partners invested about $3.2 billion in Clearwire about 18 months ago when a new joint venture was developed to build the Clearwire network.

In addition to cash, Sprint also gave Clearwire access to its 2.5 GHz spectrum. Sprint, Comcast, and Time Warner have already begun reselling the Clearwire WiMax service in areas where Clearwire has already built its network.

Clearwire now offers service in several cities including Baltimore, Las Vegas, Chicago, and Philadelphia.

There is little doubt that consumers' appetite for faster wireless speeds is growing. But Clearwire is building its network using WiMax technology while its major competitors, Verizon Wireless and AT&T, have chosen to use a competing technology known as LTE or Long Term Evolution.

Verizon is already building its LTE 4G network and will have commercial deployments in 2010. AT&T plans to continue upgrading its 3G network with newer technology, but has said it eventually plans to move to LTE. Most other major wireless operators around the world have also settled on using LTE for their next generation networks.

Clearwire does have a good head start in terms of deployments. But it's unclear if that will be enough to beat competitors, such as Verizon Wireless, in the long run.

But in order for Clearwire to even have a chance in competing with Verizon and AT&T, it will need a fully built nationwide network. And that takes a lot of money; money that Clearwire is spending very quickly. As of the second quarter of 2009, Clearwire had projected a cash burn of $1.5 billion to $1.9 billion for 2009. The company said in August it had burned through $646 million of its cash. But as it spends money, the company is also losing money. For the second quarter, Clearwire announced a net loss of $73.4 million on revenue of $63.6 million.

Clearwire will report third quarter earnings on Tuesday.

The Google factor
Google's decision not to invest in the next round of investment could be an indication that the search giant is losing faith in the technology. In a recent interview with CNET News, Andy Rubin, who heads up Google's mobile operating system division, said Google is planning its mobile future around LTE and not on WiMax.

That said, a Google spokesman told Reuters that the company still supports Clearwire's efforts to build a high-speed wireless network using WiMax. But the spokesman said the best way for Google to offer support is through product and strategic cooperation rather than investing more money.

Google also recently announced a strategic partnership with Verizon Wireless. The companies worked closely to launch a new 3G wireless Android device called the Droid. And the two companies will likely work closely to develop other new products and services on Verizon's new 4G network.

By contrast, Clearwire's other investors have far too much at stake now to abandon the network and the WiMax technology.

Intel has been a big backer of WiMax from the beginning. And the company has already invested millions of dollars in developing products. Sprint has also bet big on the WiMax technology, and the company is too far down the WiMax path to completely drop it. The cable companies Comcast and Time Warner, which are reselling Clearwire's service to their cable customers, have no other choice at this point, but to stick with the WiMax plan. The last thing these companies want to do is build their own wireless network, and they desperately need a wireless broadband service to compete with their phone company rivals.

Updated 8:32 a.m. PDT with information from the conference call.

Sprint Nextel is still losing customers, the company said Thursday as it reported a third-quarter loss.

Sprint's losses widened to $478 million, or 17 cents a share, during the quarter that ended September 30, from a loss of $326 million, or 11 cents a share, a year earlier. Revenue fell nearly 9 percent to $8.04 billion.

Results were slightly worse than analysts had expected. Analysts had been looking for Sprint to report a loss of 15 cents per share on revenue of $8.09 billion.

Sprint continued to lose customers, as it has for several quarters. But it lost fewer customers than analysts had expected. Sprint lost a total of 801,000 subscribers in the quarter. Analysts had expected the company to lose 870,000 so-called post-paid customers.

Meanwhile, Sprint competitors AT&T and Verizon Wireless added 2 million and 1.2 million customers, respectively.

That said, Sprint lost fewer customers than it has in the past quarters of 2009. In the second quarter it lost 991,000 subscribers and in the first quarter it lost 1.25 million. And Sprint's CEO Dan Hesse said during the conference call that he saw even more improvement toward the end of the third quarter due to a new service plan called Any Mobile, Anytime. This plan, which starts at $69.99 per month, allows subscribers to call any cell phone in the U.S., regardless of the carrier. The plan also comes with Sprint's Simply Everything Data plan, which includes unlimited text messaging and data services. Subscribers also get 450 voice minutes for calls to landlines.

Sprint CEO Dan Hesse

(Credit: Sprint)

Sprint's churn rate, or the rate at which customers dump its service, was 2.17 percent, up from 2.05 percent in the second quarter.

"We finished the quarter stronger than started it with the launch of Any Mobile, Anytime," Hesse said. "So the trajectory leaving the third quarter did improve. We are hoping that this will help us keep the base of people on our Simply Everything plans and get customers to migrate. So we think it will make a difference in churn."

Hesse explained that before Sprint launched its Simply Everything plans, which bundle, data and voice services into one flat price, its highest churn came from the customers who spent the most money every month. After it launched the Simply Everything plan, it reduced churn of these valuable customers. And now the highest churn rate are among customers who spend less money per month on services.

"We know these plans make a difference," he said. "And we are moving down the rate card, hoping to improve churn and our brand."

These new plans may help with reducing churn, but it hasn't helped the company grow average revenues per customer. In fact, customers with contracts spent on average $56 a month, about the same as they've spent for the last several quarters. Data revenue accounted for almost 30 percent of that.

Reducing churn is critical for Sprint, but Hesse also noted that it's important for the company to add new customers as well. In an effort to keep customers, Sprint has added a new touch-screen Google Android phone, the HTC Hero. And it will soon add another Google Android phone, the Samsung Moment to its line-up. It is also the exclusive carrier for the Palm Pre, at least until the end of 2009. It will add the Palm Pixi to its lineup later next month. And it has launched new BlackBerry devices, including the BlackBerry Tour.

Hesse said it is important for the company to have a strong lineup of phones to compete against rivals, such as AT&T and Verizon Wireless. But adding smartphones comes at a price. In order to make devices more affordable to consumers, Sprint said it paid about $950 million to subsidize equipment, which includes high-end smartphones. A year ago it spent $700 million on equipment subsidies.

'Doubling-down' on prepaid
"Competition is getting tougher among postpaid competitors as we all go after each other's base of customers for growth," he said. "But that is why we are also doubling down on our prepaid business. Because we think there is more growth there."

Indeed, Sprint did much better in the third quarter adding prepaid customers than it did adding new postpaid, contract customers. Much of this growth was helped by Sprint's Boost Mobile brand, which includes unlimited calls and texting for a $50 a month. Sprint added about 666,000 prepaid users.

Hesse said he expects the Virgin Mobile USA service, which Sprint acquired in July, to also help grow this business. The Virgin service uses Sprint's CDMA network, while Boost uses the company's iDEN network.

"We are looking to prepaid service as a potential growth engine," he said. "But still intend to get postpaid back to growth, and to do that we must focus on churn, but we also have to add customers. You can't win the game with just defense. You need to have a two-pronged attack."

But analysts and investors question this strategy. They worry that Sprint is becoming too dependent on prepaid customers, a business which has typically been less profitable than the postpaid market.

Hesse also said he was hopeful that the company's investment in 4G wireless will begin paying off in 2010 and beyond. The company has partnered with Clearwire to build a nationwide 4G wireless network using WiMax technology. The network is already up and running in 17 markets. And Sprint is offering a dual mode 3G/4G service that provides full nationwide coverage to wireless customers today.

"Another important area of growth is in 3G and 4G data," he said. "And I think the industry's best days are ahead."

Sprint Nextel has settled its legal dispute with its wireless affiliate iPCS by striking a deal to acquire the company in a transaction valued at around $831 million.

Sprint announced Monday that it plans to buy iPCS for $24 a share, a 34 percent premium to its Friday closing price of $17.88, which means the company will be spending about $426 million in cash. Sprint also agreed to assume $405 million of debt, bringing the total price tag to $831 million.

The deal is expected to close in late 2009 or early 2010. And once it is completed, the companies plan to suspend litigation.

The original agreement between Sprint and iPCS precluded Sprint from operating a competing wireless service in its territory. When the company bought Nextel in 2005, it violated this agreement, iPCS has argued.

The courts have sided with iPCS on this issue. Last year, the Supreme Court of Illinois upheld a lower court's ruling that Sprint must stop owning, operating, and managing its Nextel iDEN network in Sprint affiliate iPCS's territory.

Sprint was given 360 days to divest itself of the iDEN assets in that territory or strike some kind of deal with iPCS. Given that Nextel is the only operator that has used the iDEN wireless technology in the U.S., divesting these assets appeared unlikely.

As the deadline looms, it appears that Sprint was either unable or unwilling to get rid of its Nextel iDEN assets in this area and has instead decided to strike a deal with the company.

Once the merger is completed, Sprint said that it will no longer have to divest its iDEN network in the iPCS markets.

Sprint's merger with Nextel has been blamed for many of the problems facing the wireless operator today. One if its main problems has been a steady loss of valuable wireless subscribers. Since its new CEO Dan Hesse came on board nearly two years ago, the company has worked to improve its network and customer service. It's also been trying to repair its damaged reputation.

But even Hesse has admitted that customer perceptions do not change overnight.

Sprint said the iPCS transaction is valued at 6.4 times estimated 2010 adjusted earnings before income, taxes and depreciation. The company forecasts $30 million of annual cost savings and expects the deal to add to free cash flow in 2010.

Will it or won't it? That's the question that Palm Pre fans are asking. They want to know if the Palm's touch-screen phone will be offered by Verizon Wireless early next year.

TheStreet.com reported late Thursday that sources close to the companies said Verizon was considering not offering the phone on its network, as had been expected. But now analysts are saying the rumors are likely bogus.

Palm Pre

(Credit: Sprint Nextel)

"Our checks continue to point to healthy carrier demand for the Pre early in calendar 2010," Deutsche Bank's Jonathan Goldberg said in a research note published Friday. "We believe Palm has placed orders with the supply chain for another version of the Pre, with features highly consistent with a Verizon launch."

Verizon Wireless CEO Lowell McAdam said in June, before the Pre was even launched, that he expected the device to be on Verizon's network within six months. Sprint Nextel currently has a deal to be the exclusive U.S. carrier of the Pre.

Neither Verizon nor Palm would publicly comment on the speculation. But on Thursday, Palm reiterated its financial guidance, which it gave just last week, when it reported third-quarter earnings. In a notice announcing that the company is raising about $360 million through a public offering, Palm "reaffirmed its fiscal-year 2010 outlook, and its planned product and carrier launches in the second half of Palm's fiscal year, ending in May 2010." The E-Commerce Times wrote on Friday that Verizon's Jim Gerace had confirmed the company still plans to bring the Pre to its network in January, and a source familiar with Verizon's plans later confirmed the plans.

Several analysts have also said they don't buy the rumor that Verizon would snub the Pre. Tavis McCourt, an analyst at Morgan Keegan, said in his research note that Palm's upbeat guidance would require the company to launch the device on Verizon's network. He also pointed to Verizon's long history with Palm.

"Verizon has carried just about every Palm product in its history, and the Pre is clearly the best," McCourt wrote in his note. "We do not have insight as to the marketing support Palm will get from Verizon, but we see little risk in not getting a placement at this carrier."

McCourt also said that he expects the Pre to hit Verizon's network in February. He suspects that the rumor had more to do with investors wanting to influence the company's stock price than any actual change at Verizon. He notes that just before Palm finalized its new funding this week, rumors were circulating that Nokia was looking to buy Palm. The news of the funding deal lifted the company's stock price. And when the subsequent rumor about Verizon not carrying the Pre surfaced, the stock dipped.

"The timing of the rumor, post-deal, makes it equally as dubious as the timing of the 'Nokia will buy Palm' rumor during the roadshow," he wrote.

While McCourt agrees that it's unlikely that Verizon will spend a lot of money marketing the Pre, he said it's not unusual for carriers to spend much less on marketing a device that has already been out on another carrier's network.

"Normally, for an exclusive like the Pre or the (BlackBerry) Storm, the carrier will provide more marketing support," he said in an interview. "But the Pre will have already been out for seven months. So I wouldn't be surprised if Verizon doesn't commit as much money to marketing it."

So what is a smartphone consumer to do? Since neither company is responding to the rumors, it's difficult to say for sure what will happen. But these analysts seem pretty confident that the Verizon Pre is still a go.

Verizon consistently wins high marks for its reliable network. And the company has one of the widest coverage footprints. But customers have long complained about Verizon's lack of cool handsets. So many customers have been waiting for the Pre. And many others are hopeful that Apple's iPhone will come to wireless carrier next year.

Verizon isn't saying anything about unannounced products. But the company is building its next-generation LTE network, which will go live next year. And there is speculation that Apple might announce products that work on that network. Verizon also has its Open Development Program, which allows any device maker to quickly get devices certified for services that run on the Verizon Wireless network.

Updated at 5:21 p.m. to include a statement from Verizon to the E-Commerce Times, saying Verizon still intends to offer the Pre to its customers in January, and at 6:16 p.m. with confirmation from a source.

The Palm Pre may not be coming to Verizon Wireless after all.

According to a report from TheStreet.com, Verizon Wireless execs are reconsidering whether to begin offering Palm's touch screen smartphone in January as many have anticipated.

Palm Pre

(Credit: Sprint Nextel)

The Pre was announced at CES in January amid much fanfare. And after months of anticipation, Palm launched the device in June exclusively on Sprint Nextel's network. Shortly before the device was launched on Sprint's network, Verizon Wireless CEO Lowell McAdam said it would offer the Pre on the Verizon Wireless network within six months.

Sprint's CEO Dan Hesse said the device was exclusive to Sprint through 2009, which left many market watchers expecting a Verizon version to land sometime in January 2010. Hopes for a Verizon version of the Pre were bolstered recently when Palm's new CEO Jon Rubinstein said he expects the device to be offered on other networks very soon.

But now it looks like Verizon is having a change of heart. The Street.com said its sources have cited several reasons why Verizon execs may be getting cold feet. For one, the Palm Pre has had modest sales compared to sales of competing devices such as Apple's iPhone or Research In Motion's BlackBerry devices. According to story, Sprint has not sold more than a million Pre phones so far, which has spooked the Verizon execs.

Another issue is that Verizon supposedly wants its VCast application and download store to be featured on the phone. But this will compete directly with Palm's own app store. ... Read more

German phone giant Deutsche Telekom is looking to jump into the 4G wireless market in the U.S. through partnerships with U.S.-based service providers, according to a report by Bloomberg News.

Bloomberg reported Tuesday that Deutsche Telekom is looking to beef up its presence in the U.S. wireless market by investing in Clearwire, a company that is building a 4G wireless network using a technology called WiMax. Sources also told Bloomberg that Deutsche Telekom is also talking to Metro PCS, which recently acquired spectrum to build its 4G wireless network.

Deutsche Telekom already owns T-Mobile USA, the fourth-largest wireless carrier in the U.S. But the carrier's growth has remained flat for several quarters. And the company hasn't yet announced plans for its next-generation network.

Last week, rumors resurfaced that Deutsche Telekom was looking to buy Sprint Nextel. Sprint is the third-largest wireless operator in the U.S. and has been struggling the last few years to retain customers. The idea behind a potential buyout of Sprint is that it would give Deutsche Telekom more subscribers, which could help it compete more aggressively against the two largest wireless carriers in the U.S., AT&T and Verizon Wireless.

But now it looks like the German telecom giant could be looking for a more cost-effective way to increase its presence in the U.S. market.

Partnerships with Clearwire and MetroPCS would cost the German phone company much less than purchasing Sprint outright, and it would be a lot easier than trying to digest another wireless provider.

Buying Sprint Nextel would likely become an integration nightmare for Deutsche Telekom. Sprint Nextel is already the product of what many consider one of the worst telecom mergers ever. Sprint bought Nextel in 2005 for $35 billion. And for the past four years, the company has struggled to integrate two different wireless networks. Sprint's network operates using a technology called CDMA, while Nextel uses a technology called I-DEN. T-Mobile USA uses GSM, which would introduce a third type of technology into the mix.

But if 4G access is what Deutsche Telekom really wants, then a partnership with Clearwire makes sense. Sprint owns about 51 percent in Clearwire. Last year, the companies created a joint venture combining assets from both companies. Clearwire, which has already begun building its nationwide 4G wireless network, is using 2.5 GHz spectrum that is owned by Sprint.

Clearwire said in August that it would spend between $1.5 billion to $1.9 billion in 2009 to expand its network. Deutsche Telekom could provide more funding for this endeavor in exchange for access to the network, Bloomberg reports.

Clearwire has already made similar deals with other investors. Last year, cable companies Comcast and Time Warner Cable were among investors that provided the company with $3.2 billion in funding. Google and Intel have also invested in Clearwire.

As the Clearwire network comes online, Comcast and Time Warner Cable have each announced they will offer mobile wireless broadband service using the Clearwire network in areas where they offer cable service.

A deal with MetroPCS, which sells prepaid wireless service, could help Deutsche Telekom get access to a 4G wireless network that will use a more widely adopted technology called LTE or Long-Term Evolution. MetroPCS acquired spectrum in the 700 MHz wireless auction, and it has said that it plans to build a 4G network using LTE starting in 2010. Verizon Wireless, the nation's largest mobile operator, which also acquired spectrum in the same 700 MHz auction, is also building a 4G wireless network using LTE.

Deutsche Telekom could be weighing a multibillion dollar bid to buy Sprint Nextel within the next few weeks, said London's Daily Telegraph on Sunday. The German telecommunications giant has called on financial advisor Deutsche Bank to study a proposed deal.

As the parent of struggling T-Mobile, DT might see a takeover of Sprint as a way to revive its listless U.K. and U.S. operations. DT chief executive officer Rene Obermann has been unhappy with the performance of T-Mobile, blaming it for the parent's first-quarter loss of 1.1 billion euros ($1.46 billion) earlier this year.

Facing stiff competition for mobile customers, T-Mobile has struggled in the No. 4 spot behind Verizon Wireless, AT&T, and Sprint.

DT enjoyed a turnaround in the second quarter, taking in a profit of 521 million euros ($751 million). But T-Mobile's global operations have continued to drag, squeaking by through cost cuts rather than sales or customer gains.

Obermann's latest fix for the U.K. segment, announced last week, is a merger to join the British operations of T-Mobile UK and France Telecom's Orange. That marriage will create the U.K's biggest mobile provider.

Now T-Mobile U.S. may be next on the list. Complaining of structural problems with T-Mobile U.S., Obermann has sunk almost 1 billion each year to improve the U.S. network. But the investment has yet to pay off.

Reports of a possible DT takeover of Sprint first surfaced in May of 2008 but didn't go far at that time.

A deal that would merge T-Mobile U.S. and Sprint could create a mobile powerhouse. But analysts aren't sure Obermann can pull it off.

First, DT would need to figure out how to integrate three different types of wireless technologies, said Sanford Bernstein analyst Robin Bienenstock in a research report released Monday. After joining forces in 2005, Sprint and Nextel have faced headaches combining their two incompatible technologies. The situation could be worse for DT as it tries to assimilate T-Mobile's GSM, Sprint's CDMA, and Nextel's iDEN technologies.

Second, DT would need to cough up a lot of cash. To buy Sprint, which the Daily Telegraph said is valued at around $10.6 billion, DT would have to get a substantial injection of money from its shareholders, including the German government, which owns a 32 percent share of the company.

Despite the hurdles, the Sanford Bernstein report sees the deal as a positive, and not just for Deutsche Telekom. "For DT, an acquisition of Sprint may be the 'least bad' option," said the report. But "the U.S. wireless market is crying out for consolidation. In that context, the consolidation of a weak third and a nearly-as-weak fourth player in the market would be a welcome development...for everyone."

Sprint Nextel launched a new service plan Thursday that let's subscribers make unlimited calls to any U.S. cell phone without using up voice minutes.

For just $69.99 a month, the new Any Mobile, Anytime plan allows subscribers to call any cell phone in the U.S., regardless of the carrier. The plan also comes with Sprint's Everything Data plan, which includes unlimited text messaging and data services. Subscribers also get 450 voice minutes for calls to landlines. Subscribers already signed up for the Everything data plan will automatically be upgraded to the new Anytime Mobile plan. And a family plan for four people will cost $170.

"We don't think our customers want to have to keep track of or only talk to friends, colleagues or family members who make the same choices they do," Dan Hesse, Sprint's CEO, said in a statement.

The flat rate voice plan comes at a time when prepaid unlimited phone services have put pressure on fledgling national providers, such as Sprint. Some prepaid phone services, such as MetroPCS and Cricket Wireless offer unlimited calling for $45 a month or less. Earlier this year, Sprint announced it was buying Virgin Mobile, another prepaid wireless provider that offers flat rate pricing, to get a bigger piece of the prepaid action.

But even before flat-rate prepaid plans became popular, the big four nationwide cell phone operators began offering bundles of unlimited voice service. Over a year ago, Verizon Wireless was the first to announce a $99.99 unlimited voice plan followed by AT&T and T-Mobile. Sprint was the last of the big four to announce its unlimited plan, but it now offers the most comprehensive plan. For $99.99, Sprint's Simply Everything plan gives customers unlimited voice minutes, data, text, e-mail, Web-surfing, Sprint TV, Sprint Music, GPS Navigation, and push-to-talk.

The new Any Mobile, Anytime plan essentially discounts this service for subscribers who only talk to other cell phone users by $30.

The move to make all mobile-to-mobile voice minutes part of a flat rate plan is yet another indicator that voice revenues are getting squeezed in the cell phone market. This is good news for consumers who might see competitors fighting back with lower pricing on their plans. But most likely big players such as AT&T and Verizon Wireless are likely to add more mobile-to-mobile features to their existing plans rather than lowering their prices, says analyst Craig Moffett of Sanford Bernstein.

Clearly, Sprint is using this new pricing plan as a way to stop the blood-letting of customers. Even though the company already offers some of the lowest priced and comprehensive plans on the market, customers have been fleeing Sprint to go to other carriers for several quarters. As its total subscriber base shrinks with each quarter, a mobile-to-mobile plan that allows subscribers to call other Sprint customers holds little value to customers.

In a way, the new service is like T-Mobile's MyFaves program, which allows users to make unlimited calling to frequently called numbers on any network. AT&T announced its own version of this type of plan earlier this week, which it calls A-List. And Verizon Wireless has a similar plan called Friends and Family.

While the new pricing structure may help Sprint keep some customers, it will likely come at a high price for the company. Moffett postulates in a research note written Thursday that some of Sprint's highest volume callers already subscribing to the $99 Simply Everything Plan could downgrade to Any Mobile, Anytime plan, which would slash the company's revenue.

What's more, Sprint's new service is essentially encouraging customers to make more calls to other carriers' cell phones, which means that Sprint will have to pay the cost of connecting those calls, Moffet said in his note.

"By stimulating demand for outbound wireless calls, the company is effectively opening the door to increased wireless settlement charges, which are statutorily higher than wireline termination charges," he said.

At least for now, Sprint believes that the trade off is a risk it's willing to take as the company tries to repair is sullied reputation. Despite the fact that various surveys indicate that Sprint has improved its service and customer service, the company has so far been unable to shake its bad reputation.