Sprint PCS can be largely thanked (or blamed, depending on your outlook) for what those in the industry term the “Asian invasion.”
Sprint in the 1990s made the bold and risky decision to use an untried wireless technology-CDMA-to launch its nationwide wireless service. Sprint decided to forgo the economies of scale ensured by Europe’s widely adopted GSM standard and instead teamed with CDMA pioneer Qualcomm Inc. for its network.
The move could have spelled disaster since handset makers like Nokia Corp. are keen to maintain the widest distribution network possible. With the introduction of the CDMA protocol, handset makers were forced to adapt to the new technology-or just skip it.
And it seems Sprint’s gamble paid off.
“Sprint early on saw these manufacturers … and took a risk,” said Andrew Cole, global wireless practice leader at Adventis Corp. “They were one of the first to embrace those manufacturers.”
By going the CDMA route, Sprint managed to tap into the intense handset innovation in Asia, which has largely centered around CDMA-centric South Korea. Indeed, No. 3 handset maker Samsung Electronics Co. Ltd. hails from the country, and Sprint has benefited extensively from sales of Samsung’s sleek handsets.
Indeed, Sprint’s situation can be likened to that of upstart Nextel Communications Inc. Nextel teamed with Motorola Inc. to launch a pioneering network technology-iDEN-and has been able to capitalize on the technology’s unique Direct Connect push-to-talk capability.
Like Nextel, Sprint is “definitely one of the innovators,” said Adventis’ Cole.
As Sprint worked to build its nationwide PCS network, the carrier roamed far and wide to score handsets for its network. Instead of teaming with the industry’s traditional players like Nokia, Motorola Inc. and L.M. Ericsson, Sprint began to import phones from several Asian sources. U.S. shoppers, enamored with mobile-phone advances, began to look toward Sprint for the latest and greatest innovations.
“They have been the most aggressive it seems, with a wide variety of phones,” said Ned Zachar, telecommunications analyst at Thomas Weisel Partners. “I think it helps them in relation to the other carriers.”
As wireless carriers look to separate themselves from the pack, analysts say Sprint has managed to do so mainly with its devices. Although the carrier continues to promote its network coverage and quality, Cole said Sprint’s range of handsets is the differentiator most shoppers recognize. The situation has largely pushed Sprint into the high-tech user category. The rest of the industry’s players separate out largely due to other factors, with Verizon Wireless promoting its coverage, AT&T Wireless Services Inc. aiming at youth, Cingular Wireless offering low-cost plans and Nextel targeting the business user.
“If you look at the one thing they (Sprint) can call their own, it’s the cutting-edge coolness that their handsets have,” Cole said.
Sprint today offers a variety of innovative Samsung handsets, as well as several from fellow Asian player Sanyo. Sprint also sells high-end devices from Hitachi and Audiovox Communications Corp. as well as a device from LG Electronics. Sprint also has a close teaming with Handspring Inc. for its Treo mobile phone/personal digital assistant. Sprint’s Treo offering in part illustrates the carrier’s approach to the market, as Sprint worked closely with Handspring to determine the device’s specific features.
“I think Sprint has been pretty involved,” said Ira Brodsky, president of Datacomm Research Co. “Operators like Sprint are very aggressive about working with the handset manufacturers.”
Sprint also recently began selling a phone from Nokia, following an almost three-year breakdown in relations between the two companies. The move helps Nokia bolster its CDMA sales, and further broadens the range of handsets Sprint can offer its subscribers.
Further, Sprint was the first carrier in the United States to offer a phone with an integrated digital camera-an innovation that got its start in Japan. Sprint loudly promoted its entrance into the camera-phone market.
However, Sprint’s advanced device offerings may have played against some of the carrier’s strategies. For instance, Sprint recently modified the credit requirements on its Clear Pay program, a program aimed at sub-prime subscribers. Zachar said the Clear Pay strategy didn’t really follow hand-in-hand with Sprint’s advanced device offerings, creating somewhat of a paradox.
However, since Sprint worked to clear up its Clear Pay service, Zachar said the carrier now looks like it is positioning itself as a high-tech provider. Sprint continues to promote its CDMA 1xRTT Vision service and has recently taken aim at AT&T Wireless in an effort to attract business users.
Sprint “is getting a handle on its issues,” Zachar said.
But two main factors could dog the carrier as it looks to put its Clear Pay issues in the past. Verizon Wireless is working to take the lead in the network-upgrade arms race, as it tests CDMA EV-DO networks in Washington and San Diego. If Verizon continues with its CDMA upgrade plans, it could trump Sprint’s advanced phone offerings with even more advanced EV-DO phones, said Datacomm Research’s Brodsky. However, he said, such a situation likely won’t slow Sprint.
“I’m sure they’ll continue to try to work with handset manufacturers … to develop phones for their network that will differentiate their service,” Brodsky said.
One more factor could affect Sprint’s performance-an issue that has nothing to do with handsets. Zachar said Sprint’s legal troubles with its affiliates could drag down the carrier’s stock, just as the rest of the industry looks like it’s improving.
Sprint declined to comment for this story, citing its upcoming earnings release. The carrier is scheduled to report today.
