) is betting on a stronger smartphone portfolio to reverse the
recent trend of on-going subscriber losses. Verizon (
) and AT&T (
) will prove to be tough competition as these carriers are
also focused on smartphones which offer higher potential subscriber
We currently have a
Trefis price estimate of $4.35 for Sprint's
, about 9% above the current market price of $4, and there could be
more than 45% upside to our estimates if Sprint's smartphone
strategy pays off, leading to a doubling of the company's average
data (internet, SMS) revenue per user over our forecast period.
New Smartphone Lineup
Smartphone selection is important in attracting and retaining
new customers, and Sprint has traditionally lagged behind its
competitors AT&T and Verizon with its lineup. However the
company claims its new lineup promises to impress.
According to the company, its Samsung Epic 4G (launched in Q3
2010) and HTC EVO (launched in Q2 2010) are the two best rated
smartphones on the market in PCWorld's rankings, even ranking ahead
of the iPhone 4 and android based devices. Additionally, the
company also states that ZDNet ranks HTC EVO as the best smartphone
on the market.
We attribute about 60% of Sprint's mobile phone revenues in Q3
2010 to smartphones. In light of this trend, we expect that mobile
phone revenues will reach close to $2.4 billion in 2010 from $1.95
billion in 2009, a healthy 23% increase.
Although demand for smartphones will drive Sprint's mobile phone
revenues higher, Sprint will end up paying higher subsidies for
such phones and will consequently need to make up the cost of the
phones through higher subscriber revenues.
Smartphones Drive Higher Data Revenues
Given the higher revenues anticipated with smartphones, we
expect the average revenue per user (ARPU) to increase by about
15-20% which Sprint hopes will compensate for the upfront loss on
the handset. Average revenue per user consists of two parts:
(1) voice ARPU (2) data (internet, SMS) ARPU. Smartphones
primarily drive higher data ARPU.
We estimate that Sprint's monthly data ARPU has more than
doubled over the last four years and estimate that it will increase
from about $15 in 2010 to nearly $19 by the end of our forecast
period. However, there could be an upside of 45% to the
Trefis price estimate for Sprint's stock if the company's data ARPU
were to double again, reaching $30 by the end of the Trefis
forecast period, as more Sprint subscribers adopt smartphones.
You can see
the complete $4.35 Trefis price estimate for
Sprint's stock here.