January 29, 2007 4:00 AM PST
Broken connection for Sprint Nextel
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Sprint's troubles with the Nextel migration could have been exacerbated by the fact that the company is trying to juggle several large initiatives at once. At the end of 2005, after finalizing the merger with Nextel, Sprint entered into a joint venture with four cable operators to develop integrated wireless broadband services.
It also launched its over-the-air music service and began promoting its data services to entice customers to subscribe to its new 3G services. In 2006, Sprint started upgrading its existing 3G network to the next version of technology known as EV-DO (Evolution Data Optimized) Revision A. And in August of 2006, Sprint announced it would invest $3 billion to build a new fourth-generation, or 4G, wireless network over the next two years by using Wimax technology.
"The company totally lacks focus," said Albert Lin, an analyst with American Technology Research. "Trying to create grandiose visionary initiatives, like a 4G network or a converged cable and wireless service, sounds good, but it's difficult to implement."
What's more, the company has been without a chief operational officer since August, when Len Lauer, who had handled day-to-day management of the company, was forced out. Sprint executives had said they wouldn't replace Lauer, but this month CEO Gary Forsee said the company would start a search for a replacement.
"Sprint has definitely been experiencing some operational difficulties," said Michael Nelson, an equities analyst at Stanford Group. "But management has recognized that there are problems and they're trying to right the ship."
In the meantime, investors and subscribers not willing to switch providers will have to wait to see if Sprint's management team can turn the situation around. At a market valuation of about $50 billion, plus the $20 billion in debt the company is carrying, Nelson said it would be difficult to imagine a takeover anytime soon. But judging from the other megamergers in the telecommunications market, such as the $86 billion takeover of BellSouth by AT&T, anything is possible.
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