S&P Picks and Pans: Sprint, DreamWorks, Payless, Lawson Analyst opinions on stocks making headlines Wednesday From Standard & Poor's Equity Research
Sprint Nextel (S; $22.02)
Maintains 2 STARS (sell)
Sprint announces plans to acquire one of its privately held affiliates, Northern PCS, pending necessary approvals, for $313 million. Sprint made multiple affiliate acquisitions in 2005 and 2006, and this latest, if completed, would add 167,000 direct customers. In our opinion, the company is in a transition as competitors take market share. We expect Sprint to offer handset subsidies to stimulate subscriber growth, which we contend will pressure margins. Our 12-month target price of $18 assumes an enterprise value (market capitalization plus net debt) of 7.4 times our 2007 EBITDA estimate, a slight premium to peers.
The CDMA and iDEN networks are working at all-time highs. Customer Care has gotten much better in the past year. I argue that churn is now more a factor of a lack of bundled offerings than the first two factors. When VZ and T can make wireless part of a bundled package, it creates more "stickiness" with the customer. Customers are less willing to drop part of a package deal. This is why being part of a cable/wireline/Internet package must be pursued with gusto by S.
Dino, I disagree with you. While the coverage for CDMA may be at an all-time high, I still have more dropped calls now than I did pre-merger...and there are FEWER iDEN subs now than back then. That's problematic, if you ask me!
But more importantly, I think that the lack of packaging isn't Sprint's problem. Far from it, I think the problem is simply Sprint can't market itself in any way, shape, or form without causing people to recall how lousy Sprint was in the past. And since most people subscribe to the adage "Once bitten, twice shy", that means very few if any people will bother to give Sprint the time of day...be it in a package deal or otherwise.
What Sprint needs to do is figure out how to market their product that will gain them the most subscribers. Data subs are great, and they should continue with that. But their voice side [marketing] sucks, so more focus should be paid there.
On a positive note though, I did see a few more commercials for both Sprint and Boost (still no Nextel) on the national airwaves...too bad they're the same old stupid commercials. They're simply recycling. Hopefully we'll get some new blood when it comes to commercials. But in the mean time, Spirnt should recycle that "Theft Deterrent" commercial. Talk about hitting the ball out of the park!
P.S. s_ls, re the short, I am in a long term pattern. What goes up today will surely fall tomorrow...esp when bad news is reported. :D