VIDEO: Sprint Nextel planning ‘strategic resolution’ of iDEN business: Rumors swirl around iDEN’s fate

// By use of this code snippet, I agree to the Brightcove Publisher T and C
// found at http://corp.brightcove.com/legal/terms_publisher.cfm.
var config = new Array();
/*
* feel free to edit these configurations
* to modify the player experience
*/
config[“videoId”] = null; //the default video loaded into the player
config[“videoRef”] = null; //the default video loaded into the player by ref id specified in console
config[“lineupId”] = null; //the default lineup loaded into the player
config[“playerTag”] = null; //player tag used for identifying this page in brightcove reporting
config[“autoStart”] = true; //tells the player to start playing video on load
config[“preloadBackColor”] = “#FFFFFF”; //background color while loading the player
/* do not edit these config items */
config[“playerId”] = 1716410686;
config[“width”] = 520;
config[“height”] = 587;
createExperience(config, 8);

CEO Dan Hesse stopped short of saying Sprint Nextel is fully committed to the network in a conference call announcing second-quarter results. Instead, he merely said the carrier is focusing on improving its iDEN experience and adding new handsets.

“What I’ve also said is, since I’ve taken this job, that every option is on the table, and every option will continue to be considered,” Hesse said.

Indeed, Sprint Nextel has lost more than 500,000 iDEN customers in each of the past four quarters. In its most recent quarter, the carrier shed 901,000 customers from its iDEN network.

Something has obviously gone wrong, especially with the iDEN business, which Sprint Corp. desired when it acquired Nextel Communications Inc.

“Nextel had the lowest churn,” said Keith Mallinson, president of Wise Harbor. “They were in a magical position.”

Mallinson also suggested that Sprint was given a handful of bad- credit customers because while Nextel was dressing itself up for sale, it was not as diligent in flushing out poor customers as it should have been.

“As a result, the iDEN operation is nothing like as valuable as it was at time of acquisition,” Mallinson said.

This, along with many other factors, has spurred speculation that the carrier is planning to sell the iDEN network. A recent letter from Hesse to Keith Cowan,
president of Sprint Nextel’s strategic planning, indicated some sort of eventual transaction, saying Cowan would be paid $1 million upon Sprint Nextel’s approval of the “strategic resolution of the iDEN network.”

Sprint Nextel spokesman James Fisher said strategic resolution doesn’t necessarily mean selling the network, but it is an option. “We are looking at every strategic option for the iDEN network including improvements, investments, partnerships or divestments.”

A CNBC report said Sprint Nextel is already in talks to sell the network to former Nextel Communications Inc. subsidiary NII Holdings Inc. or to private-equity investors.

Other interested groups could include the public-safety community, but Sprint Nextel’s latest iteration of the iDEN network was not constructed to handle the possible load capacity of the public-safety community.

The decision to sell may be the easy part. Finding a buyer may prove challenging. Roger Entner, an analyst at IAG, said there are issues surrounding the iDEN network that make it unattractive. “Saying they want to sell it is one thing; somebody wanting to buy it is another,” Entner said. “I think they are stuck with it. They wanted to merge and now they are really merged.”

If Sprint Nextel does decide to sell and can manage to nab a buyer, it’s also likely the carrier won’t sling a large profit. Pali Research said Sprint Nextel would have to sell the iDEN network for around $5 billion, a fraction of the $35 billion the carrier initially paid for Nextel.

Plus, Sprint Nextel has been pushing to migrate iDEN customers to the CDMA network, providing newer, data-rich phones and plans for the push-to-talk community. If sold, this transition might not happen. Mallinson said that 50% of PTT customers are loyal to iDEN because of the PTT features. “If they’re not using the button, they’re very vulnerable to churn,” Mallinson said.

He went on to question what any potential buyer would do with the iDEN network. The business wouldn’t be successful as a standalone network, he said, and is only valuable as part of Sprint Nextel.

“There is no other migration path than what Sprint is pursuing with CDMA,” Mallinson said. “iDEN does not support high-speed data and doesn’t have that kind of evolution, so what else would someone do with it? That’s going to be the problem.”

Financial foible

The carrier is also trying to straighten out its finances. Sprint Nextel announced on Aug. 6 plans to offer $3 billion of convertible stock, only to then retract the offer the very next day, citing poor market conditions.