Blog Post

The MediaFlo Buzz: Sprint-Nextel Clues

I managed to get a hold of the Deutsche Bank report on Qualcomm, which mentions that Sprint-Nextel might adopt MediaFlo (we wrote about it here last night)…here’s the relevant portion of the note, written by Brian Modoff:
“In discussions with our industry contacts, we have learned that Sprint/Nextel is planning to
launch a major mobile entertainment marketing campaign around mobile-TV, high speed data
access (EV-DO), streaming video, satellite radio and music. The campaign will apparently be
along the current “Yes you can” slogan.
Initial signs of this campaign in motion are visible. Last week, Sprint/Nextel announced a
partnership with Sirius, whereby Sprint customers would be able to receive satellite radio via
their mobile phones. As part of the Sirius Music plan, customers will have unlimited access
to 20 commercial-free music channels, and an additional channel devoted to artist interviews
and performances for $6.95 per month.
Additionally, this week, Sprint/Nextel also announced a partnership with Real Networks to
offer Rhapsody Radio on the Sprint PCS network. Rhapsody radio will provide Sprint
customers streaming radio stations from Real’s Rhapsody online music service. Other
services include news and videos download. The initial cost of this service is also $6.95 per
month for unlimited access.
MediaFLO next in line?
In the next leg of its marketing campaign, Sprint/Nextel are expected to focus on mobile-TV
with initial emphasis on sports. Our channel checks indicate that Qualcomm’s MediaFLO is
the strongest technology contender on the list, and Sprint/Nextel in conjunction with
Qualcomm could layout a FLO demo network as early as mid-January 2006.
Given that Sprint has a five year exclusive contract with NFL and ESPN mobile is Sprint’s
MVNO partner, we believe the combined Sprint/Nextel entity could launch this demo network
right before Super Bowl, and broadcast football and other sports channels to promote this
mobile entertainment campaign.
Our channel checks indicate that MediaFLO could be commercially available in mid- 2006,
with volume shipments of FLO handsets as early as August – October of 2006. We believe
Qualcomm plans to target the total BOM on FLO chips in the $10 – $12 range.
In the event that Sprint/Nextel launch MediaFLO in 2006, we believe the competitive
landscape in the US market could pressure other large operators (i.e, Verizon Wireless and
Cingular) to follow Sprint/Nextel’s footsteps in offering consumers mobile-TV. In our opinion,
given that the only alternative technology (being considered in the US), DVB-H is behind
MediaFLO (chipset development and availability, revenue sharing plans, network planning
etc) and is not as power efficient as FLO (since DVB-H was adopted from DVB-T, a terrestrial
digital video broadcasting standard, whereas MediaFLO technology was built from groundup,
with mobile networks as a focus), we believe Qualcomm’s MediaFLO could emerge as
the de-facto mobile-TV standard in the US. We reiterate our Buy rating on Qualcomm and
price target of $50.”