Is Sprint About to Lose One of the Few Advantages It Has Left?
For a short while, it enjoyed a first-mover advantage in 4G as it partnered with Clearwire to erect its 4G WiMAX network. That proved to be a costly mistake, as LTE won the 4G wars and Sprint is now scrambling to build out its LTE network. There goes that advantage.
Roughly a year ago, Sprint teamed up with Google (NAS: GOOG) to integrate Big G's popular Google Voice service directly into Sprint devices. Sprint product VP Kevin McGinnis called it "an extremely important event for Sprint" when it was announced a year ago. It was also interesting because Google Voice has been interpreted as a threat to carriers as Ma Bell and Big Red in particular are slow to embrace Voice-Over-Internet Protocol, or VoIP.
A recent study even showed that data now comprises 85% of mobile traffic but just 39% of revenue for mobile-network operators. If you flip that figure around, that implies that the 15% of voice traffic is driving most of the carrier revenue. Translation: We're all paying way too much for voice minutes. Don't even get me started on pure-profit SMS texting plans (which are also threatened by Google Voice's free texting). No wonder they're clinging to legacy voice-minute plans.
That's why Sprint's hookup with Google Voice was so notable, with some even calling Sprint the "most innovative." Sprint customers who used Google Voice got the benefits of expanded voice mail with transcription, call forwarding, and cheaper international calling. And Google foots the bill on those services, which is nice since Sprint is running low on dollars.
In fairness, Sprint recently caught up with an advantage that its larger rivals were enjoying: Apple's (NAS: AAPL) iPhone. Sprint now includes the iPhone in its lineup thanks to a $15.5 billion purchase agreement with Apple, despite the fact that the device is a margin- and data-sucking hog.
Well, Google is making eyes at other carriers. Google Voice product manager Vincent Paquet recently told CNET that the company is having discussions with other providers, without naming any specifically. Paquet called the Sprint partnership successful and said it resulted in "a steady stream of people signing up for it."
If Google decides to bring AT&T or Verizon into the fold and the bigger players get to enjoy those benefits at little to no cost, Sprint may be running out of advantages.
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At the time this article was published Fool contributorEvan Niuowns shares of Apple, AT&T, and Verizon Communications, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Google and Apple.Motley Fool newsletter serviceshave recommended buying shares of Google and Apple and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.