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Sprint Nextel’s Weak MVNO Plan

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Sprint Nextel lowered its earnings guidance for the year from $13B to between $12.6 billion to $12.9 billion (EBITDA) in its second quarter earnings report today, and reported lowered earnings for the quarter of $370 million, down from $599 million. The news led the company’s stock down over 15% to $17.07, and Moody’s placed the company’s ratings under review.

In addition to the merger costs, this could be an early negative sign of the company’s aggressive MVNO strategy. Sprint Nextel says it lost 31,000 wholesale subscribers in the quarter, which UBS attributes to weak business in Virgin Mobile. The company’s MVNO partners also includes ESPN Mobile, among others, which has not been doing so well. Year to date the total amount of Sprint Nextel’s wholesale subscribers is at 5.35 million, with less than 200,000 net adds this year.

5 Responses to “Sprint Nextel’s Weak MVNO Plan”

  1. Raymundo

    For the most part, pre-merger the wholesale numbers equals Virgin Mobile.

    Amp’d soft-launched in Dec so it hasn’t been a year of commercial operation yet and Helio launched in May.

    I am interested in what Helio will bring to the Earthlink party. There has to be a link for their broadband assets. Where did one get that Earthlink has EV-DO access? Helio for sure has that.

    Virgin Mobile got over three million prepaid subs I think and was in there early. They don’t have a whole lotta content except for that link with MTV. But MTV is hooking up with Amp’d as well and also threw in some $ with a seat on the Board.

  2. Keith Herrington

    Before the merger? I didn’t see many MVNO numbers stated. I think you’re confusing direct customers with wholesale customers.

    The content is still weak on MVNO’s. I think that’s what is hurting them.
    Amp’d has been a year, but it’s also the Verizon MVNO. Helio is Earthlink’s take on the consumer market, and can use either Verizon or Sprint.
    I think the major problem is nobody is really educated on the ‘value-add’ that MVNO’s offer going direct. I think companies like Earthlink have it right, being able to do data-roaming on both sides, EVDO and all, but all the ones just reselling one carrier’s service with very little of their own content (Virgin Mobile for example) is just asking for pain.

  3. Well, the Sprint MVNO plan is in essence the buildout of a bigger network to accomodate the new MVNO entrants – right?

    I think that while the MVNOs like M ESPN are not doing well (and Disney Mobile will also have its challenges), it’s may be premature to call it dead. But is that a knock on Sprint or these new companies with their heady and misguided biz plans and their implementations?

    The previous knocks on Helio and Amp’d and the calls for them to fold is still early. Helio hasn’t been operating for even 6 months yet and Amp’d less than a year. Come on, give them a fair shake for a least a year or so.

  4. Charlie Sierra

    How much longer until Forsee (ceo) and Lauer (coo) are run out of town?

    Before the merger, Nextel and Sprint could each generate 500k netadds per quarter.

    Post merger, Sextel can only muster 200k combined!!! That’s an 80% drop.

    What’s happening is very clear, all the high value post-paid subs are going to Verizon, and Sprint is getting stuck with low value, high churn, prepay’ers.

    LeggMason’s Bill Miller had a huge bet on Sprint, and other losers this year, but certainly this morning means he can KISS his S&P record good-bye.