Tag: Sprint

Sprint catches "reds under the beds"

The new McCarthyism which is infecting Washington at the moment has caused Sprint to dump the Chinese phone making equipment maker Huawei.

Despite the fact that US allies use Huawei and its security appears to be on a par with other telecom gear makers out there, the former British colony of Virginia is trying to get it banned.

Rep. Mike Rogers, the chairman of the House Intelligence Committee, said that Sprint promised him they will not buy telecommunications equipment from the Chinese company Huawei.

Rogers is making a name for himself by claiming that the Chinese government could use Huawei, the world’s largest telecom equipment maker, to tap into US communications networks and spy on people in the United States.

As we reported yesterday, Rogers has managed to get a ban against Chinese manufacturers getting government contracts, but in this case it looks like he is pressuring even private companies.

The evidence for this is that the company’s CEO Ren Zhengfei was once a member of the Chinese military two decades ago.

Rogers said that he had also managed to spoil a deal between SoftBank and Sprint. Softbank uses a lot of Huawei gear in its Clearwire network which Sprint says will be replaced. Federal regulators had been sniffing around the deal and it seems that that the promise to dump Huawei will make them go away.

Rogers added that he was pleased with Sprint’s mitigation plans, and he will be continuing to look at ways to improve the government’s existing authorities to thoroughly review all the national security aspects of proposed transactions.

In other words he is using “security considerations” to ban everything made which is branded by Chinese companies.

Huawei was tarred and feathered by the US Intelligence Committee after it failed to provide detailed information about their ties to the Chinese Communist Party. Part of the problem was that Huawei does not have any ties to the Chinese Communist Party; in fact its CEO was banned from party membership. Huawei has insisted that the report’s claims are baseless.

Bill Plummer, a spokesperson for Huawei, said the company hasn’t been involved in the review of the Sprint-Softbank deal. He warned that pressuring Sprint to promise not to partner with Huawei would “set a nasty protectionist precedent that could be used against American companies in other markets”.

He pointed out to the Hill that given that all suppliers rely on common global supply chains and are subject to common vulnerabilities, it would seem unlikely that any government would blackball any one supplier because that government would know full well that this would do absolutely nothing to address security concerns.

Plummer added that the US approach was a market-distorting political, protectionist exercise and one that would require American telecommunications carriers and consumers to sacrifice world-leading technology, innovative, competitive and affordable broadband, as well as jobs and inward investment. 

Sprint snaps up the rest of Clearwire for $2.2 billion

US telecoms provider Sprint has purchased the remainder of Clearwire in a deal worth $2.2 billion.

Sprint announced that it has entered into a definitive agreement to acquire the remaining 50 percent of the firm, following its previous investment in the mobile broadband company.  

The deal saw Sprint pay $2.97 per share, valuing the firm at a total of $10 billion, including net debt and spectrum lease obligations of $5.5 billion.   This meant an increase on the $2.60 per share that Sprint originally offered in its first bid last month.

The deal will see $800 million of additional financing available to Clearwire in the form of exchangeable notes, according to a Sprint statement.

The transaction was unanimously approved by Clearwire’s board, with shareholding companies such as Comcast and Intel indicating their support for the deal.  

Softbank, which has acquired 70 percent of Sprint, also gave the thumbs up to the deal.

Sprint CEO Dan Hesse, who recently took a paycut, said that the deal will enable the firm to make the most of ClearWire’s wireless spectrum, adding it to its own network capacity.

“Today’s transaction marks yet another significant step in Sprint’s improved competitive position and ability to offer customers better products, more choices and better services,” Hesse said.  “Sprint is uniquely positioned to maximise the value of Clearwire’s spectrum and efficiently deploy it to increase Sprint’s network capacity.” 

He added: “We believe this transaction, particularly when leveraged with our SoftBank relationship, is further validation of our strategy and allows Sprint to control its network destiny.”

The deal is expected to be finalised in during the middle of 2013, coinciding with SoftBank’s investment in Sprint.

Sprint CEO takes a paycut

Sprint’s CEO Daniel Hesse has agreed to take a paycut this year as punishment for wasting company cash on a deal with Apple.

According to Reuters, Hesse thought he was onto a winner by subsidising Apple’s iPhones, but it turned out that the deal only cheered the bottom line of Cupertino.

In a letter to his HR department he said that the action was voluntary and his actions would set his 2012 incentive compensation target opportunities back to 2010 levels.

While it is nice to see a CEO put their hand in their pockets after making a mistake, he has to admit that paying $15 billion to sell Apple’s iPhones has not gone well with investors.

To get the deal Sprint pays Apple a subsidy that is 40 percent higher, or $200 more per device, than what it pays for other phones.

Investors noted that the high subsidies on the device had pushed up costs at the Number 3 US operator. While it added more subscribers, it also meant it had to stump up for infrastructure changes. 

Sprint still betting the farm on the iPhone

Despite the fact that subsidising the iPhone appears to be killing its business, Sprint is continuing to bet the farm on Apple.

According to the Wall Street Journal, while shareholders are starting to get very concerned about the company’s debt and general well being, Sprint managers have been getting the company even deeper into its abusive relationship with Apple.

Reportedly it has committed itself to buy 30.5 million iPhones over the next four years, a deal worth around $20 billion.

Such a deal will only work if the iPhone attracts more subscribers to Sprint’s network but if it can’t sell all of the phones it runs the risk of going bankrupt.

This is because Sprint is paying $500 for each iPhone so that it can offer them at the “low” prices consumers expect. Even if iPhone users adopt the expensive subscription plans that iPhone users adopt, it will take ages for Sprint to see its money back.

Boy Genius Report says that the $20 billion deal might have landed Sprint an exclusive with the iPhone 5. It might be that Sprint will be the only carrier to get the iPhone 5 when it is announced, while both Verizon and AT&T will get slightly souped-up iPhone 4S models and only get the iPhone 5 later. That will help Sprint clean up on its iPhone investment, but it may still not pull the company’s nadgers out of the fire. 

Apple iPhone deal could kill off Sprint

Fruity peddler of shiny toys, Apple might just be responsible for the No. 3 US mobile provider Sprint Nextel filing for bankruptcy.

Sprint Nextel was so desperate to get on the iPhone bandwagon that it signed a Faustian style pact with Steve Jobs that resulted in it giving a lot of cash to subsidise the pricey product.

As a result, Bernstein analyst Craig Moffett has said the company will underperform and the debt-laden company faces tough competition and steep costs due to factors such as its iPhone deal with Apple.

He told Reuters that things will get even worse for Sprint as it faces “new and larger risks” if Apple launches a high-speed iPhone later this year based on a technology that Sprint’s bigger rivals will have installed more widely.

Moffett said he was not predicting a Sprint bankruptcy. It is acknowledging that it is a very legitimate risk which is rising.

The difficult time for Sprint will be 2015, when it has to find $2.6 billion to pay off its debt at the same time another $3 billion in debt comes due for Clearwire which is majority owned by Sprint.

Other analysts do not see Sprint filing for bankruptcy in the next few years but admit it has become a riskier bet since it unveiled big investment plans last October.

Part of its problem is that it pledged $15.5 billion to buy iPhones from Apple in the next few years while at the same time it is embarking on a $7 billion network upgrade. It has already raised billions of dollars in capital markets to help fund these projects.

Some analysts think that there is a good bet that the company could pull off its ambitious plans.

Moffett said that another worry is how much more money Sprint will need to spend on buying wireless spectrum to compete with Verizon Wireless and AT&T.

We have warned that deals that Apple did with the big US carriers could cause more harm than good before, but this is the first time that someone has admitted that Jobs’ Mob might end up sending outfits over the edge.

T-Mobile forced into the arms of Sprint

T-Mobile might be forced to link up with Sprint Nextel after its owner’s $39 billion deal with AT&T collapsed.

Deutsche Telekom has been left in the lurch after AT&T gave in to the US regulators and dropped its bid for T-Mobile USA. It needed the cash from the sale to make a dignified Germanic exit from the US market and concentrate on Europe.

According to Reuters, DT’s chief executive Rene Obermann has lost a lot of time and will now have to invest in the US market or find a new way to exit the country. Since leaving the country will be too expensive, he is probably going to have another crack at a merger with Sprint.

Will Draper, head of telecoms research at Espirito Santo, said T-Mobile is run-down and lacks the spectrum it needs to build a network to handle the data volumes that US consumers and businesses use on smartphones.

Obermann told investors he was working on a long-term cunning plan for T-Mobile and the only real option that analysts can think of is a deal with Sprint.

Obermann said that in the long term, T-Mobile needed more spectrum and network capacity but he would not speculate about any inorganic steps or deals. An organic step is when you walk into dog mess, so we guess he’s not talking about anything like that.

Before talks with AT&T were announced in March, Deutsche Telekom was looking at a potential deal with Sprint. This involved a sale of T-Mobile USA to Sprint in exchange for a stake in the combined company.

However, Obermann changed tack and bet the farm on a deal with AT&T. The reason was that while a Sprint merger was better in the long-term in the United States, it would be a pain for Deutsche Telekom because it would need to invest in the new venture.

Sprint also needs cash thanks to a costly network upgrade and the fact that its agreement with Apple to flog the iPhone bled the outfit dry. 

IT outfits run on dysfunctional boards

For some reason IT outfits are being run by clowns who are fiddling while their empire burns, according to the Wall Street Journal.

WSJ analysts sat down and tried to work out which outfits had boards which were about as functional as the Mad Hatter’s tea party. The first thing they had to do was rule out the HP and Yahoo boards. HP and Yahoo were so dysfunctional that they bent space and time and needed a new system of physics and mathematics that could factor in new measurements of stupidity.

They then came up with a list, and what is surprising is that most of them were IT or comms outfits.

Top of the list was Sprint-Nextel which has lost 80 percent of its market value over the last five years. Unable to compete with AT&T and Verizon Wireless, Sprint’s board has consistently backed CEO Dan Hesse. It watched as the oufit bought Nextel for $35 billion. It has lost money for four years and revenue has fallen from $40.1 billion to $32.5 billion over that time. The board applauded as the outfit moved to deploy WiMAX 4G technology, which is not compatible with the 4G systems built by AT&T and Verizon Wireless. While AT&T has attempted to buy T-Mobile to increase the size of its business. Sprint, however, has done nothing as it loses subscribers.

Next on the list was AMD which the WSJ says may be the single greatest failure among large tech companies based in America.

Over the last five years its AMD’s stock is down more than 75 percent. It has lost money from 2006 to 2008, had tiny margins in 2009 and 2010 with net income of $376 million and $471 million, respectively. One of the only reasons that it did so well during this period was the $1.25 billion settlement payment from Intel in 2009 to end patent disputes.

WSJ said that the Board let CEO Dirk Meyer go in January 2011 by “mutual agreement,” apparently because of disputes over strategic direction. In the two years he had been there the company had been slightly less in trouble. However it took the board eight months to find a replacement, and they picked Rory Read who was COO of Lenovo, which, like AMD, was slow into getting into mobile.

The WSJ said that AMD has failed to move into the rapidly growing mobile market and there was also a spate of chip designs put it further behind the results of R&D work by rival Intel in 2009 and 2010.

Cisco came in at number five which is surprising because its CEO John Chambers is a pin-up for most Wall Street types. Its problem was that it allowed Chambers to begin an ill-advised diversification strategy. It bought lots of companies and this caused its profit margins to drop. Cisco’s shares have lost a third of their value in five years.

While it was losing cash on its non-core business, its core router business is under pressure from Juniper and Chinese router makers.

Selling routers and switches is slowing and the outfit can’t deal with tough competition from upstarts like Aruba Networks and F5 Networks. The WSJ thinks the problem was that the Cisco board gave Chambers too much support and allowed the company to stay on the same road to no where for too long. 

Next iPhone appears from Sprint this October

That rumoured next iPhone will appear in mid-Octber, according to the Wall Street Journal’s sources, and it will be sold by Sprint Nextel.

Sprint Nextel will get the iPhone 4 to flog, too. The WSJ report gives credence to our tip-offs that the next iPhone will be a cut-rate budget phone to attack the mid-range market, while still carrying the Apple branding and locked  into iOS. The proposed launch date fits in with the iOS refresh, too. Sources at the WSJ tend to be pretty reliable.

Earlier this month we reckoned that the date will be pushed into October for an imminent iPhone. We also heard from the channel its new model will aim to seduce potential users who are on the fence over from cheaper Android alternatives. It is likely to be thinner and a bit faster, fighting off the competition from Apple’s favourite supplier at the moment, Samsung, and others it is suing like HTC.

Sprint is the third largest carrier in the States. It really could do with adding an iPhone or two to its portfolio. Compared to AT&T and Verizon, which have sold Apple products for years, Sprint has had to do without.

An October release means Apple’s Q3 won’t enjoy the surge of Church converts and the faithful trying to get their hands on a new shiny rectangle with a bit of fruit etched on the back.

However, it should put sales up in the run-up to the true competition, rumoured for a March release next year. 

Taiwan watchdog bites Huawei

It seems that everywhere the Chinese hardware maker Huawei shows its face, trouble is never far behind.

Lately there have been spying accusations leading to the blocking of a deal by US authorities, an ongoing bust up with ZTE.  Even when it tries to do something nice like upgrade London’s ramshackle Tube it is denounced as cunning plan to listen in on boring commuter conversations, although everyone knows you do not talk on the Tube.

Again it is the company links to the Chinese military and government authorities which is doing the firm a lot of harm.

Plans by Huawei to set up branches on the island of Taiwan are now being met with stern opposition from the joining of forces by the Ministry of Economic Affairs (MOEA) and, more seriously, the National Security Bureau (NSB), echoing the attempted deals with 3Leaf and Sprint in the US.

The two organisations will be putting Huawei’s plans to establish itself more firmly in Taiwan under the microscope, with the telecoms operator intent on upgrading a representative office into a branch according to CENS.

It is claimed that this decision is directly linked to Huawei’s top execs being former members of the People’s Liberation Army.

According to Taiwan officials dealing with China business affairs the NSB has the final say.  It is similar to the Committee of Foreign Investment in the United States (CFIUS), which demanded Huawei give up on its attempts to gain ground in the US.

Whether the same situation of resisting expansion moves will occur in Taiwan is yet to be seen of course.

MOEA officials aware that the Chinese government is looking on as events unfold against a background of investment talks between Taiwan`s Straits Exchange Foundation and Chairman Chen Yunlin of China`s Association for Relations Across the Taiwan Straits.

T-Mobile USA loses 99,000 contracts in Q1 2011

In T-Mobile USA’s Q1 2011 earnings report, filed today in the small hours on the wires, it revealed that it has lost 353,000 more contract customers since the same period last year. Net customer losses sat at 99,000 for Q1 2011 compared to 77,000 in Q1 2010. 

The total contract customers who left by the end of the first quarter of 2011 was 471,000, compared to 318,000 the previous quarter and 118,000 for the first quarter of 2010. T-Mobile USA claims that the decline is down to “continued high contract churn due to competitive pressures” – in other words, the competition is hot and it is losing out.

Its competitors in Verizon, AT&T and Sprint are still outperforming T-Mobile USA, ZDNet points out, as it lacks the same reach for devices and networks. 

The attrition rate is the problem, says T-Mobile. CEO of T-Mobile USA Philipp Humm said in a statement: “We still have challenges facing our business as evidenced by high contract churn and contract customer losses in the first quarter of 2011.”

Average Revenue Per User (ARPU) looked a little more attractive, as Humm optimistically hummed: T-Mobile has “seen some positive trends in the quarter as evidenced through data ARPU growth rates.”

ARPU held 46 percent in the first quarter of this year, which T-Mobile USA says is consistent with Q4 2010 and Q1 2010. Contract ARPU sat at $52 in Q1 2011, up from $51 in Q1 2010.