The premise behind the turnaround plans of Sprint-Nextel (NYSE: S) is that the 4G WiMax ultra-fast wireless network that it is building with Clearwire (NASDAQ: CLWR) with the financial support of Intel (NASDAQ: INTC) will draw customers from AT&T (NYSE:T) Wireless and Verizon Wireless which each has nearly twice Sprint’s subscriber base of 50 million customers.
The plan has several potential flaws. AT&T and Verizon will eventually adopt another 4G technology called LTE. Each has been slow, cautious perhaps, because of the costs and the open question of whether customers want to move to 4G. The process will have the normal bumps and disruptions that 3G had in its early days. Consumers are already wary of service problems on AT&T’s network. But, better to have a slower 3G product than an untried 4G one.
Not all 3G phones will work on 4G. Sprint will begin selling a 4G handset from HTC. Whether people will want to turn in their current handsets is open to question. So is the notion that a move to Sprint may force people to sign up for new subscriptions plans.
Sprint has been plagued by customer service problems ever since it added the incompatible Nextel network. The lack of good service has turned up in a number of consumer satisfaction surveys. Wireless subscribers may be wary about switching to a company with service problems
One of the largest hurdles Sprint faces is the popularity of the Apple (NASDAQ: AAPL) iPhone. It is sold exclusively by AT&T and there are rumors that it will be available through Verizon soon. But, it may never be available through Sprint. Sprint’s new HTC-built handset may be good, but, in the minds of millions of customers, it is not an iPhone.
Sprint says it will have 4G service in most major cities by the end of 2010. That service will be available to 120 million Americans. New technology is often adopted slowly. Sprint does not have the balance sheet and the financial staying power of its larger rivals who can wait out the 4G experiment.
4G may be faster, but customers will, usually, be concerned about whether it works as well as older technology. And, many people don’t need a faster wireless connection.
Douglas A. McIntyre
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