Sprint Acquisition by SK Telekom or Deutsche Telekom Spells Disaster, Unless They Ask the Experts

Implications: Sprint completely missed the ball on their acquisition of Nextel, resulting in an awful acquisition that also laid waste to the main brand.  Now, SK Telekom or Deutsche Telekom is poised to do exactly the same thing.  You want due diligence, come to the true experts for answers.

Analysis: Nextel literally fooled Sprint the first time along, teasing the naive old school carrier with high APRU, low churn subscriptions into an awful deal quite akin to the Time Warner purchase of AOL.  Now, both Duetsche Telekom and SK Telecom assume they might be wiser, having learned from the vast mistakes that Sprint Nextel has already gone through.

The obvious, above screen issues are front-and-center, though I still think many people have glazed over them. 

1) Sprint's subscriber base has gone down the drain, generally because they've concentrated on low-end phone offerings and have been late to the market with the worthwhile products, first with the Motorola RAZR copies and now with the smartphones that are leading the market.  AT&T has the iPhone, and Verizon has been leveraging HTC, LG, and RIM to gain market share.  They want to leave the low-end market, but this has been tough to do.

2) Sprint's churn has gone through the roof.  They bought Nextel, in part, for its low churn, but that story is long gone.  Their churn has skyrocketed partially due to the low end base, but even more importantly to the way they altered their credit approval process.  After discussing this with many people, I don't believe many people truly know what Sprint did in this process.

3) Nextel's market, near maxed at the time of the merger, has dissipated quickly.  Nextel targeted the business market and a specific type of business market.  They moved extremely grudgingly into the consumer space and made some big errors on the move.  Now, their service is poor and their loyalty is weak.

4) They made no gains in the merger.  The CDMA to iDEN technology didn't merge.  They failed to develop an upgrade path to subscribers, a la Cingular and AT&T.  They failed to properly merge billing in time.  Customers didn't benefit an iota from the merger, and that is a recipe for disaster.

5) Data revenue has taken a dip at Sprint, long a leader in this space because of a supposed advanced network.  While every other carrier, especailly AT&T with the iPhone has advanced greatly in mobile revenue (and, as I've mentioned before, voice is no longer king), Sprint has reversed course.  This is an awful, shocking trend for the carrier.

Yet, there are many less obvious "issues" with Sprint, both as contributing elements to the above ... and as issues in and of themselves.  SK Telecom or Deutsche Telekom could make the right move in purchasing Sprint, in part because they can likely get a dirt cheap price, but they better know what they are doing first.

My advice -- dig deep, dig very deep before jumping.  Hey, you might even want to go outside the ranks of your own and Sprint's own employees to gather answers.  You might want to go beyond the analyst world.  Perhaps former employees, consultants, and partners to Sprint Nextel might be able to help you out.  The depth of information that people, like myself, have on the company is large.  I served as a strategic consultant to Nextel before the merger, then headed a multi-carrier wireless company that was given a distribution agreement from Sprint (in addition to AT&T / Cingular and T-Mobile).

Due diligence, in this instance, needs to be thorough ... and expensive.  Otherwise, these companies could risk the same catastrophic error Sprint made in the first place.