Like Dr. Doolittle’s creature with two heads at opposite ends of its body, Sprint’s strategic business decisions are pulling it (and its shareholders and customers) in opposite directions.     

The recent Network Vision announcement is yet another example of Sprint’s failure to develop a clear strategic plan. Given this track record, Sprint should put aside any notion of taking over T-Mobile.  If history is any predictor, that would not be good for anyone.

Sprint’s Strategic Errors: A Brief History

Sprint-Nextel Merger

In August 2005, Sprint acquired a majority stake in Nextel Communications in a $35 billion stock purchase. Nextel subscribers started leaving, and Sprint was saddled with the cost of running two incompatible networks. In 2008, Sprint wrote down 85 percent of the Nextel purchase price, acknowledging that it could not turn a profit on its acquired asset. [Investopedia.com, 11/3/08]

In December 2010, Sprint Nextel Corp. announced it would start phasing out the Nextel part of its network, in light of declining revenues, profits, subscribers, and operating margins almost every quarter since 2007. The shutdown is scheduled to be completed in 2013 – a full seven years after the Nextel acquisition. [Associated Press, 12/6/10; Sprint Investor Call 10/7/11]

Clearwire

In May 2008, Sprint contributed its 4G spectrum and WiMax operations, plus some cash, to acquire majority economic ownership (but not control) in Clearwire. Sprint then purchased WiMax capacity from Clearwire. This proved to be a rocky relationship, with Sprint in its dual role of wholesale customer and competitor with Clearwire’s retail service.  [PCMag.com, 5/7/08; PCMag.com 10/7/11]

In October 2011, Sprint said that it will stop selling phones and other devices compatible with Clearwire’s network at the end of 2012, after Sprint turns on its own 4G LTE data network. The announcement baffled most analysts because it will cost Sprint a great deal more to build its own network than to complete the Clearwire WiMax deployment. Clearwire’s stock (54 percent owned by Sprint) plummeted, as analysts interpreted Sprint’s move away from Clearwire as the “nail in Clearwire’s coffin.”  [Associated Press, 10/7/11; afterdawn.com 10/8/11]

Network Vision

In December 2010, Sprint unveiled a Network Vision blueprint claiming it would “deploy a cost-effective, innovative network plan to further enhance voice quality and data speeds for customers across the United States.” [Sprint Press Release, 12/6/10]

In October 2011, after multiple delays, Sprint announced the long-awaited launch of Network Vision.  Wall Street unanimously panned the plan as “ridiculous,” “raising more questions than answers,” (Goldman Sachs), heightening Sprint’s “significant financial/operational challenges” (MorganStanley). Bernstein Research’s Craig Moffett pointed out that Sprint will need to raise $4.9 billion over the next two and half years, with the likely result that Sprint’s service could suffer while it sets aside spectrum for its 4G network upgrade. [Portfolio.com, 10/7/11; Equity Research, 10/7/11; MorganStanley 10/10/11]