Minority Investment by International Player in Sprint Might Make Most Sense

Implications: 1.      It is interesting that the writer of the source article does not buy into the argument recently made by his own publication that Sprint “has begun to show signs of a rebound.” 2.      SK’s involvement in Helio is not an analogous situation. 3.      A gradual penetration into the U.S. wireless market by international service providers might turn out to be the best approach.

Analysis:  Another recent news piece in the The Wall Street Journal states the following: “[Sprint’s] new Samsung Instinct phone is selling well and its new marketing -- which uses Chief Executive Dan Hesse in TV ads -- is beginning to pay dividends. Sprint is expected to show improvement in its customer-turnover rate in the second quarter.”  While the change might be the improved voice quality on the Nextel phones -- in losing so many subscribers that were using a network with limited capacity -- and not the ads, Sprint does seem to be looking up a bit.  An investor wants to get in as early as possible for an expected increase in value – not wait until “Sprint untangles the mess left from the Nextel fiasco.”   

In order to be a world player, having a stake in the U.S. market is probably essential.  It is also not out of the question that the U.S. for the first time becomes a key leader in driving new applications for wireless – whereas operators in Asia and Europe in the past were the principal innovators.  In addition, with a small initial investment, SK can test the waters in terms of how far the U.S. government will go in allowing an overseas entity to take share of a service provider catering to its agencies – in this case, it would include both wireline and wireless services.   

Regarding Helio, there is little similarity with Sprint.  Helio is an MVNO, which is a type of business that in most situations lacks a very good business case.  On the other hand, Sprint with its CDMA and long-haul networks does have a lot of upside potential.