Sprint Nextel’s Weak MVNO Plan

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.