Sprint Stiffed on Big Contract

Updated from 11:25 a.m.

Sprint's (S Quote) turbulent rebuilding effort is looking more like a demolition job.

Adding to the Reston, Va., telco's list of woes Thursday was the announcement by the General Services Administration that Sprint was the only major U.S. carrier to be excluded from a massive $20 billion communications services contract.

Three phone giants -- Verizon (VZ Quote), AT&T (T Quote) and Qwest (Q Quote) -- were picked as suppliers to a five-year phone and Internet upgrade program called Networx.

Federal contract watchers and analysts say it is unusual for a major national service provider to fail to make the cut.

"This announcement is really a contract vehicle, naming the companies that are allowed to bid on task orders," says one former GSA procurement official who now works as a consultant. "If a company is not granted approval, it basically bars the company from seeking government contracts."

Sprint made a statement.

"Sprint is disappointed not to receive a portion of the Networx Universal contract," it said. " Sprint has enjoyed an 18-year relationship with its government customers. The Sprint team spent significant time and energy on the program and has made large investments to meet the diverse requirements of the agencies. Federal agencies have come to rely heavily upon our high performing network, our strong portfolio of converged IP solutions and mobile enablement."

This latest setback adds to a long list of missteps and stumbles by Sprint.

Under CEO Gary Forsee's leadership, Sprint has managed to squander the advantage it acquired with Nextel and its horde of loyal, high-paying customers. Sprint now has the industry's highest churn or monthly customer defection rate.

Turnover in the executive offices has also been high. Three key leaders jumped ship last year: onetime chairman and former Nextel chief Tom Donahue, strategy man Tom Kelly and operations head Len Lauer.

Meanwhile, with its eroding customer base, falling long-distance and wholesale prices and weakening business services unit, Sprint managed to turn in four consecutive quarters of disappointing financial results last year.

In January, after losing 306,000 postpaid mobile phone subscribers in the fourth quarter, the company lowered guidance and said it would fire 5,000 workers. Even Sprint's roster of cell phones, once one of the industry's prime showcases for edgy new devices, has become a tech backwater.

For example, Sprint finally added the Motorola (MOT Quote) Razr last quarter, missing out on the phone's two-year run as the hottest handset going. And Sprint's answer to the Apple (AAPL Quote) iPhone Samsung's UpStage music phone has already earned a few tepid reviews.

Shares rose 24 cents Thursday to $18.75.