Sprint Nextel (S), the third-largest telecom carrier in the U.S., has reportedly sealed an agreement to provide its comprehensive suite of wireless and wireline services to Pinnacle Airlines Inc, a subsidiary of Memphis-based Pinnacle Airlines (PNCL). Pinnacle Airlines, which operates around 141 regional jets in North and Central America and the Caribbean, is one of the largest regional carriers.
Although terms of the deal were not disclosed, Sprint will offer a broad range of voice and data services, including mobile integration and international long-distance, mobile broadband, wireless WAN (Wide Area Network) and land mobile radio. The company will also provide more than 1,100 devices to facilitate smooth delivery of these integrated services.
The Pinnacle deal is expected to yield a substantial revenue stream for Sprint’s converged (wireless and wireline) business solutions. The company will leverage its newly established Business Markets Group (BMG) operating unit to offer these services to Pinnacle Airlines.
BMG delivers large assortment business applications to enterprises and government customers, based on 3G mobile broadband technology and industry leading push-to-talk wireless network. The unit contributed significantly to Sprint’s operating results in the first quarter of 2009 with the wireless and wireless services offered to business customers generating approximately $4 billion in revenue.
Sprint remains significantly challenged by the dismal economic environment that has forced consumers to curtail spending on wireless services, leading to the precipitous decline in subscriber base and associated revenues. The company continues to lose a significant number of postpaid wireless subscribers (lost 1.25 million customers in the last quarter, its highest quarterly loss ever) while its two head-to-head competitors, Verizon (VZ) and AT&T (T), have consistently registered healthy customer growth and gained market share.
Sprint continues to experience integration problems associated with its iDEN technology-based network which is not quite state-of-the-art compared to the technology platforms used by its rivals.
Moving forward, business and government customers represent the key for a potential turnaround for Sprint driven by the high value contract wins (like Pinnacle) at BMG. We continue our Hold recommendation for Sprint Nextel.
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