It would be perilous to deduce overly broad implications from the release of a single handset – even if it is an iDEN handset made by struggling Motorola Inc. on sale at ailing Sprint Nextel Corp. – but it would be foolish under the circumstances to ignore the larger picture.
Sprint Nextel recently launched the i570 at $100 with a two-year contract, one of 14 handsets available in its Nextel Direct Connect line.
Over the past few years, Sprint Nextel has said it would attempt to migrate customers on its iDEN network to its CDMA network, while maintaining the iDEN network for customers who preferred it.Those customers preferring the iDEN network are generally considered fans of the technology’s push-to-talk service, which despite attempts by other operators to launch competing offerings, has proven to be a superior service.
Even Sprint Nextel has acknowledge the power of the iDEN PTT offering, having recently replaced the “Walkie-Talkie” tag line the carrier rolled out in an attempt to consolidate its PTT services with the original “Direct Connect” name used for years by Nextel.
It is widely known that Sprint Nextel’s ability to absorb its 2006 “merger of equals” with Nextel has presented integration, customer service and financial hurdles.
Last week, amid word that Sprint Nextel had lost another 683,000 postpaid and 202,000 prepaid customers in the fourth quarter, a spokeswoman reiterated the company’s position on the migration issue through e-mailed answers to questions.
Updating Direct Connect efforts
“We have no plans on ‘shuttering’ the iDEN network,” said spokeswoman Amy Schiska-Lombard. “We view Direct Connect as a differentiator in our portfolio and are making investments in advertising, handsets and network to ensure that customers get the best experience possible when using it. Currently the application rides on our Nextel National Network. We will continue to invest and improve as long as the application stays on that platform. Since we are committed to Direct Connect, the network it rides on should become a non-issue. The application and portfolio and usage of our customers will drive our network investment decisions, not vice versa.”
Those investments include portfolio expansion, network improvements and advertising and marketing. A “Get Well Program” will send sales teams across the country to “help access how Sprint can win back customers” and a “Come Back” campaign that will “entice” customers to use data services such as push-to-text and push-to-send pictures such as blueprints.
Still a good business for Moto
Translating Sprint Nextel’s careful statements about Direct Connect’s future also is perilous. But in 2007, the carrier lost 1.2 million postpaid customers, and last year acknowledged that a substantial proportion of migrating customers were from its iDEN network. So the carrier seems intent on staunching the flow, providing options through iDEN, iDEN/CDMA and CDMA connectivity to retain current subscribers and return former customers to the fold.
Although Motorola was unable to provide a source to clarify the company’s relationship as Sprint Nextel’s predominant iDEN supplier of handsets and network equipment and the health of that relationship, and Sprint Nextel said the relationship’s details were confidential, analyst Ryan Reith at IDC said that Sprint Nextel represented 75% of Motorola’s global iDEN business, spread across more than 40 countries. The next-biggest iDEN market is Latin America, Reith said, at about one-quarter the size of Sprint Nextel’s demand.
Motorola, Reith said, still ships millions of iDEN handsets – 2.8 million in the third-quarter last year, 4 million the prior quarter – and thus it’s “still a good space for Motorola.”
“I wouldn’t read too much into this one handset launch,” said analyst Avi Greengart at Current Analysis. “But this seems to be an acknowledgement in handset form that an effort to bury the iDEN network isn’t working.”
