Sprint Nextel Backs MVNOs

AT&T Corp. and sports media icon ESPN Inc. are gearing up to offer mobile phone service over the network of Sprint Corp., the carrier that is betting its future on a planned merger with Nextel Communications Inc.

And Time Warner Cable may be Sprint’s next partner. Other companies, including Qwest Communications International Inc. and Virgin Mobile USA LLC (the joint venture between Virgin Group and Sprint), already offer mobile service over Sprint’s network.

How will the merger of Sprint and Nextel affect the wireless resale agreements?

“We remain committed to the strategies we’ve announced and to the partners we’ve announced,” says Sprint spokesman Jeff Shafer.

Sprint has been striking partnerships to lease its wireless network, helping companies sell their own flavors of wireless service as a so-called mobile virtual network operator, or MVNO. The Overland Park, Kan., carrier announced a deal in December with ESPN to help the sports-entertainment company launch ESPN-branded mobile phone service in 2005.

Sprint’s next potential partner: Cable companies planning to deliver Internet phone service to millions of high-speed Internet and video subscribers (see story). Sprint confirmed it is in discussions with Time Warner Cable, the secondlargest cable company. Time Warner Cable already offers wireline IP phone service and anticipated ending 2004 with 200,000 subscribers. A wireless service would allow Time Warner Cable to offer the so-called quadruple play of services: video, Internet access, wireline phone service and wireless.

“What is absolutely clear is cable companies want that whole package of communications: wireless and wireline, entertainment, data, voice,” Shafer says. “These relationships are much broader than simply providing a pipe.”

“We’re in discussions with all the major cable companies with how to address wireless,” he adds.

Analyst Jeff Kagan says the Time Warner Cable development is part of a broader trend. “Cable companies are gearing up to go into direct competition with the Baby Bells for all the services. The Bells offer wireless as part of their bundle so that’s the area the cable companies need to get into,” he says in prepared comments. “We are going to see most of the cable companies start to sell wireless services in 2005, but they will resell an existing provider, not install their own networks.”

The combination of Sprint and Nextel “will become the partner of choice for mobile virtual network operators … such as cable companies and wireless MVNOs,” Gartner Inc. analysts say in a news analysis.

According to Reuters, a consortium of cable companies is looking into wireless alternatives and has hired Merrill Lynch to examine opportunities. Comcast Corp., the biggest cable and Internet provider, may become one of the next big MVNOs.

“From our standpoint, I think we really are in the catbird seat, because with 21.5 million subs, I think any one of the independent wireless operators would be very keen to do something with us,” Comcast Executive Vice President and co- CFO John Alchin said at a Credit Suisse First Boston conference.

In addition to exploring potential partnerships with the likes of Time Warner Cable, Sprint has forged agreements with traditional phone companies that don’t own a wireless network. Qwest is among those wholesale partners. On March 1, Qwest began selling wireless service to new customers over Sprint’s network. The Denver-based regional phone company ended the third quarter with 778,000 wireless subscribers. “The Sprint/Nextel merger will not impact our wholesale agreement,” says Qwest spokesperson Carey Madsen.

AT&T also is in the process of implementing a wireless service over Sprint’s network. The service is geared for large businesses. “We are happy with the contract arrangement we have with Sprint and look forward to delivering a broad array of voice and data mobility services in the first half 2005 that are ‘built for business,'” reads an AT&T statement.

According to one industry source, AT&T’s mobile service will not go headto- head with Sprint or Nextel. The reason: While Nextel has strong relationships with small and medium businesses, AT&T is targeting larger enterprises. And Sprint has a large base of wireless consumer subscribers, according to analysts.

Sprint ended the third quarter with 23.2 million wireless customers, including 3.1 million through affiliates and 2.8 million via wholesale agreements. The company does not break out the numbers further.

In a related development, Sprint vendor Convergys Corp. announced in December Sprint has expanded a software licensing agreement with the billing specialist to support its wholesale wireless customers. The contract is good for six years and calls for Convergys to bill the additional users, and help the carrier to consolidate billing systems to reduce costs.

Under the terms of the licensing agreement, Convergys’ Infinys Rating and Billing software will serve as Sprint’s common rating engine, enabling Sprint to support its existing wireless services. Convergys will provide a turnkey solution, including product software, professional services for custom enhancements and operational support services.