Sprint (FON) shows that having your name in lights isn't everything in the wireless sector.
Along with many of its peers, the Kansas telco has suffered a sharp decline in its core business of providing phone service to consumers and companies. Like its rivals, Sprint has sought to expand its offerings in the fast-growing cell-phone business, including its well-known Sprint PCS brand.
But now, with big wireless rivals joining forces and the slide in conventional phone sales reaching
alarming rates, Sprint's growth is increasingly coming through
wireless wholesale deals -- ones in which customers take service under another company's name. Take Tuesday's deal with
AT&T said it will
sell Sprint's mobile-phone service under the AT&T name as part of a bundle offering to business customers. AT&T says it will reclaim the wireless mantle when Cingular, a joint venture of
, completes its buyout of the faltering
Analysts have been expecting Sprint to carve out more of the wholesale market niche as the retail cell-phone service sector changes shape. With the pending combination of AT&T Wireless and Cingular set to create the nation's largest wireless carrier and Verizon Wireless already a formidable player, Sprint finds itself a distant No. 3. Lacking the marketing muscle necessary to win millions of new subscribers each quarter, Sprint's wholesale strategy helps add customers at far lower costs.
One of the benefits to Sprint in this deal is that it will add fuel to its fast-growing wireless business at a time when sales of its conventional phone services are suffering dramatic declines, says Muayyad Al-Chalabi, an analyst with industry strategist company RHK.
Sprint already handles the traffic from
wireless customers, and it counts wholesale revenue as a quarter of its total wireless sales.
The AT&T business customers also provide a good fit in terms of Sprint's network usage. Most of Sprint's wireless traffic is from consumers who tend to make calls outside business hours. That leaves plenty of unused calling capacity for whatever business users AT&T manages to bring on, says Al-Chalabi.
Sprint shares rose 56 cents, or 3%, to $17.67 in midday trading Tuesday.
Some investors saw the sales agreement as a big boost to Sprint's wireless affiliates who operate separate companies selling Sprint branded service in smaller markets.
Outfits such as Conshohocken, Pa.-based
and Lubbock, Texas-based
stand to reap higher traffic volumes and roaming revenue from any growth in Sprint's wholesale business, according to some investors who are long those companies. Ubiquitel was up 2% Tuesday, while Alamosa rose 6%.
For AT&T, the ability to sell wireless adds one more offering to the bundle of services it peddles to business customers. Though reselling a rival's service offers little room for profit and is somewhat distasteful, like asking
, it does give AT&T the ability it once had to sell all services to all customers, say analysts.
This will be AT&T's second go at bundling. The first, investors will fondly recall, was cobbled together and then dismantled by C. Michael Armstrong. This time around, AT&T promises better integration of services and features that allow users the ability to manage their home, work and wireless calls.
The sales agreement between Sprint and AT&T is nonexclusive, and RHK's Al-Chalabi says he wouldn't be surprised if AT&T struck similar deals with