I consult, write, and speak on running better technology businesses (tech firms and IT captives) and the things that make it possible: good governance behaviors (activist investing in IT), what matters most (results, not effort), how we organize (restructure from the technologically abstract to the business concrete), how we execute and manage (replacing industrial with professional), how we plan (debunking the myth of control), and how we pay the bills (capital-intensive financing and budgeting in an agile world). I am increasingly interested in robustness over optimization.

Friday, March 25, 2011

Sprint's Marathon

There's been a lot of public hand-wringing at the proposed AT&T / T-Mobile USA merger, particularly with regard to Sprint. Sprint is a distant third in subscribers today, but this is a very dynamic market. Today's subscriber count may not be relevant to tomorrow's.

First, most mobile subscribers aren't bound to a network. While a post-merger AT&T/T-Mobile and Verizon Wireless would have most of the customers, there are no switching penalties for long-term handset contract customers. On top of it, many of those subscribers are not using smartphones, but ordinary handsets; little amounts of data trapped in those handsets also means low switching costs.

Second, the mobile platform field is about to get very crowded with RIM (new tablet, vigorously fighting an erosion of their smartphone business), HP (WebOS), Windows Mobile, and Nokia possibly retaining MeeGo for tablets. Along with Apple and Android, that makes as many as 6 different mobile computing platforms. They're each spending billions in pursuit of this market. None of them want to finish in 6th place.

Third, hardware competition is increasingly fierce. Motorola is smarting from losing pride of place in the Verizon stable of offerings, having been displaced by Apple. Nokia needs to protect sales of existing devices while placing their future line of Windows Mobile devices.

While the name of the game is scale, these dynamics suggest it's not a mature market share game for the networks yet, as much as they're caught in the middle. On the sell side, those hardware and platform vendors late to the party are especially motivated sellers. On the buy side, first time smartphone buyers - the market everybody is slugging it out for - have low switching costs, while first-time tablet buyers will be more price sensitive than the first movers.

Being in the middle isn't all together a bad thing, as it means opportunities for organic customer growth. That offers a less expensive alternative to growth through M&A, something to which Deutsche Telecom (Voicestream), Sprint (Nextel), and Verizon (the primary beneficiary of customer defections in the wake of the Sprint-Nextel merger) can attest.

Which brings up Sprint in 2011. Data hungry devices should perform fast and reliably on WiMAX. With a low subscriber base, there can't be as much competition for Sprint's bandwidth as there is for customers on AT&T and Verizon networks. As a means of getting customers hooked, that alone might be attractive to platform and hardware providers. Perhaps Messers Elop and Ballmer do a deal with Sprint because they believe networks are integral to their "3rd platform" strategy. Perhaps HP, more US centric in their mobile offering than the rest of the field, sees the same. Or perhaps hardware and platform vendors going all out in a market share game will find Sprint an attractive channel through which they can provide hardware on the cheap without appearing to be the solution of little value.

If true, this makes the networks more spectator to the action than central to it. For Sprint, that makes it a marathon.