Sprint Path to 4G: Integrating CDMA/EV-DO and Mobile WiMAX

Story by Berge Ayvazian. Submitted on May 27, 2009

I attended the Sprint Industry Analyst Conference on May 13 and 14, nearly one year to the day after Sprint held the first Analyst conference with Dan Hesse as its new CEO. The 2008 conference was held less than six months after Hesse took office and during the same month that the merger of Sprint Xohm and Clearwire was announced. It took another six months to complete this transaction, in which Clearwire acquired the Xohm assets from Sprint and the partnership with Google, Intel, Comcast, Time Warner and Brighthouse was finalized in December 2008.
As such it was only fitting that I used this trip to Kansas City to get immersed in the Sprint strategy for integrating its existing 3G network and the 4G Mobile WiMAX network being built by Clearwire to enhance the mobile Internet experience. I also had the opportunity to examine Sprint 4G in the context of the company’s other priorities as it restores financial stability by reducing its cost structure and debt, dramatically improves its customer care and satisfaction, introduces new cutting edge devices, refocuses its wholesale and business markets strategies and launches a new ad campaign showcasing the “Now Network.” Dan Hesse presented an upbeat assessment of the company’s accomplishments over the past year and covered this year’s core principals including Customer Experience, Brand and Financial Condition. He highlighted the key customer care and satisfaction metrics that demonstrate that Sprint is restoring its position in key market segments as AT&T and Verizon Wireless battle for the title as the largest US mobile operator.
This meeting was my first opportunity to meet Bob Brust, who joined Sprint as CFO a year ago after retiring as CFO of Eastman Kodak, two years as Unisys CFO and following a 31-year career with General Electric. Under Brust’s leadership, Sprint has reduced its annual labor cost by $2 billion and continues to reduce its cost structure in order to use the resulting free cash flow to pay back $9 billion of debt due over the next three years, rather than raise new financing in tight capital markets. Brust is working with other Sprint executives to reduce access and roaming costs, close contract call centers, sublet office space and evaluate proposals to outsource some network management and information technology functions. He also described plans to reallocate some 25 percent of these savings to marketing and advertising aimed at stemming further customer losses. Brust also described the positive effect of the Clearwire transaction on Sprint’s cash flow and balance sheet, since Sprint traded its 2.5 GHz, spectrum and other Xohm-related 4G assets for a 51% stake in Clearwire, and the costs for deploying the Sprint 4G network and upgrading its backhaul capacity are now being funded by Clearwire and its investors.
Over the past year Sprint has been reorganized to separate the retail and wholesale businesses, to create separate sales and marketing organizations for consumer and business markets, and to build a prepaid retail business around the Boost brand to offset customer losses in the iDEN network and Nextel business. Hesse highlighted the success of the Boost $50 “Monthly Unlimited” prepaid offer launched on the iDEN network in February, and indicated the company is considering Boost-only stores and other initiatives to build on the popularity of the Boost brand. Sprint will also be placing more emphasis on its wholesale business, in an effort to leverage its channel partnerships with Virgin Mobile USA which recently acquired Helio from SK Telecom and Earthlink and companies like Amazon.com which uses Sprint’s EV-DO network to download books to the popular Kindle e-reader.
The Business Markets team under Paget Alves is now responsible for 19 million business customers in segments ranging from SOHO and SMB to Enterprise and is targeting growth by selling 9 core solutions into six key vertical industries. This organization is also responsible for managing the Sprint 4G products and services that will complement the existing EV-DO and iDEN networks, Nextel DirectConnect and mobile broadband services for business customers.
Dan Hesse also used this occasion to introduce a new member of his executive team, Robert H. (Bob) Johnson, a senior marketing, sales and customer service executive formerly with AT&T Wireless, as president of the company’s CDMA business unit. Sprint’s CDMA business unit encompasses all postpaid consumer marketing and sales, including acquisition, growth and base marketing programs, as well as the more than 11,000 retail sales touchpoints. He will also assume responsibility for the demand generated from the new “Now Network” ad campaign, which has replaced the Dan Hesse retro black and white ads with an edgy and futuristic brand image. We can only hope that this new Bob H. Johnson is as successful in reinstating growth in the core consumer mobile market as Bob L. Johnson who has presided over the dramatic improvements in Sprint customer care during the past year.
After a long drought, Sprint is starting to introduce a number of new cutting edge devices to restore excitement for business and consumer customers. Hesse was particularly enthusiastic about the sleek new Novatel MiFi personal hot spot that links Sprint’s 3G mobile broadband to up to five WiFi-connected devices including notebook computers, cameras, media players and smartphones. Over the past year, Sprint has lost millions of customers to AT&T’s iPhone, T-Mobile’s G1 and Verizon’s extensive portfolio of smartphones. The touch screen Samsung Instinct was launched the flagship of Sprint’s Simply Everything plans and used to defend the high end of Sprint’s customer base. But even as the second generation retooled Samsung Instinct S30 has gone on sale at Sprint stores for $129.99 on-contract price, Sprint is now completely focused on the launch of the Palm Pre, scheduled for June 6. This elegant combination of advanced touch screen and slide out QWERTY keyboard could easily serve more as an offensive weapon than as a retention tool for existing Sprint customers. I am looking forward to personally experiencing the smooth functioning WebOS and the seamless integration of productivity applications, media content and web surfing. At the promotional price of $199.99 (with a two year commitment) the Palm Pre should help Sprint address the next iPhone release also reported to be in June, and it should appeal to both high end consumers and individual business customers.
Sprint has been actively marketing and selling its 4G products and services under the new Sprint 4G brand in Baltimore, leveraging the original XOHM mobile WiMAX network now owned and operated by Clearwire. The Baltimore network coverage is being expanded and additional products and services will be launched under the Sprint 4G brand in 2009 and 2010, and Clearwire, 51% owned by Sprint, will also re-launch services under the Clear brand later in 2009. Sprint has been selling the industry’s first dual-mode 3G EV-DO/WiMAX U300 USB card made by Franklin-Wireless primarily to business customers. Sprint claims that the availability of this 3G/4G card for $79.99 (with a two-year commitment) and the 4G mobile broadband service at $79.99 (a $20/month premium over the standard rate for Mobile Broadband) has resulted in significantly higher sales in Baltimore over other Sprint markets. Although the 3G mobile broadband service carries a cap of 5 gigabits per month, the 4G service is unlimited with peak download speeds experienced in Baltimore today up to 12 Mbps and average download speeds of 2-4 Mbps and upload speeds of .75 to 1.5 Mbps. Sprint has plans to introduce EV-DO plus WiMAX equipped notebooks later this year, and also plans to offer a 4G embedded handset later in 2010. This approach will also allow Sprint to provide an uplink capability of 1Mbps or greater and offer extremely low latency to support real-time video and other social media applications.
Sprint 4G is positioned as complementary to its existing 3G mobile broadband services and to Clearwire services and products sold under the Clear brand. While Clearwire is selling WiMAX-only service currently only in Portland, Sprint is leveraging the coverage and reliability of its extensive nationwide 3G EVDO network along with the 3-5x performance improvement of mobile WiMAX targeting business customers first in Baltimore and wherever it becomes available. Sprint is looking forward to the planned commercial availability of mobile WiMAX in Atlanta and Las Vegas this summer and will launch its dual mode 3G/4G services in Portland soon. Both companies will be distributing their 4G products in third party retail outlets such as Best Buy, with Clear pure-WiMAX products aimed at local consumers and Sprint 4G dual mode products targeting traveling business customers.
Sprint’s strategy is to integrate its existing “most dependable national” 3G mobile broadband network and Clearwire’s 4G network to enhance the performance of both networks and the Mobile internet experience of its customers. In many locations, Clearwire is using Sprint towers for its WiMAX base stations and is upgrading the backhaul infrastructure to support both its 4G network and Sprint’s 3G traffic requirements. Sprint also serves as the channel manager for the 3G/4G services sold by the cable partners and expects Comcast to initiate service in at least one market by yearend 2009. I look forward to an update on Sprint’s 4G business and plans from Sprint strategic planning chief Keith Cowan at 4G World in September.

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