“Economic uncertainty” was the phrase of the day for Sprint Nextel. During a Feb. 19 conference call, executives of the No. 3 U.S. wireless service provider used the two words liberally to describe the company’s fourth-quarter results. In the three months ended in December, sales fell, losses ballooned, and customers jumped ship. There was so little visibility into the future that the company declined to make a forecast for the current quarter.
Usually when Sprint reports a bad quarter, it’s easy to blame challenges specific to the company, including subpar customer service and network performance. But this time around, Sprint’s woes augur a rough year for the entire industry.
Sprint Nextel’s results are an early indication that the tough economic times engulfing construction, banking, and other industries are catching up with wireless carriers. Already, the downturn has pushed equipment maker Nortel into bankruptcy and ravaged sales of phone manufacturers like Motorola. Now it’s the service providers’ turn. “I don’t think there’s any sector that’s been untouched,” says Brent Iadarola, a global research director for consultant Frost & Sullivan. “The wireless sector is not immune.”
Business Customer Exodus
Sprint Nextel may be feeling the pinch from businesses earliest because, among the top wireless carriers, it has the largest proportion of corporate customers. Sprint reported a “sizable” increase in turnover among corporate customers, which account for more than 25 percent of its user base. Companies are eliminating employees and canceling contracts for Research In Motion BlackBerrys and other business-friendly devices that run on the Sprint Nextel network. “We can watch unemployment [rise] and see a direct impact on our enterprise business,” Sprint Nextel CEO Dan Hesse says in an interview with BusinessWeek.
Though Sprint is the largest national provider of wireless service to businesses, the enterprise exodus may also affect the top two mobile-phone service providers: AT&T…