) recently announced that it will distribute its products through
another 100 stores of
Costco Wholesale Corporation
). The move will enable the company - which already offers
products through 106 membership warehouses - to reach out to a
wider customer base across the U.S.
Costco membership warehouses allow customers to purchase branded
merchandise at discounted prices compared to retail stores. To
date, Sprint has leveraged the opportunity to generate higher
product sales through Costco membership warehouses and now
expects the addition of stores to add to its popularity and drive
We believe the company's need to increase distribution centers
emerges from the increased penetration of smartphones including
Android, tablets, USB modems, hotspots and routers, all of which
are performing well in the market. Currently, Sprint enjoys a
smartphone penetration of 86% of its post-paid sales. In Jun
2013, the company launched 4G LTE based Windows Phone 8
smartphones - HTC 8XT and Samsung ATIV S Neo under two-year
Recently, the company also announced to offer Samsung Galaxy Mega
on its network attracting customers for its 4G services. Besides,
Sprint also activated over 1.4 million iPhones in the second
quarter, 41% of which belong to new customers. Over the long
term, the company expects iPhone to generate $7-$8 billion in
profits with the addition of 1-1.2 billion gross subscribers
adding $6-$6.8 billion in profitability.
Overall, the company sold around 5 million smartphones in the
second quarter. In addition, the company also introduced its
tri-band LTE data device that uses LTE on 800 megahertz, 1,900
megahertz and 2.5 gigahertz. The device will be available for
sale in late 2013.
We believe that after Sprint's merger with Japan's telecom
company, Softbank Corp., the company is diverting its focus on
expanding business in the U.S. market so as to turn its loss
making business into a profitable organization. As a result,
strategic investment and collaboration remain crucial to the
company's future. While on the one hand the company is planning
product sales, which we believe includes contract services
bundled with sale of equipment like smartphones and tablets, on
the other hand, it is reportedly scrapping the idea of
participating in Canadian spectrum auction, in which
Verizon Communications Inc.
) is also bidding. This shows that Sprint's primary focus is on
scaling up its operations in the home ground rather than entering
into a highly competitive market like Canada, which may turn out
all the more aggressive with Verizon's entry.
Beyond this, the company is banking its Network Vision strategy.
Through this plan, the company is concentrating on the core
Sprint platform, which includes CDMA, WiMAX and LTE technologies
that led to the eventual termination of the Nextel platform (iDEN
business) in Jun 2013. The company began the deployment of CDMA
voice on 800 MHz in early 2013 and is expected to deploy LTE on
800 megahertz by this fourth quarter.
As part of the Network Vision strategy, the company's LTE
services currently cover over 151 markets with 20,000 sites on
air. In 2013, the company expects to have LTE coverage for
approximately 200 million customers. We believe the efficient use
of capital, reduction of cell sites, elimination of dual
networks, backhaul efficiencies, reduced churn, lower roaming
charges and energy cost savings bode well for Sprint's long-term
growth. The company expects the Network Vision deployment to be
over by the end of 2013, two years ahead of the original
Sprint Corp., which operates with
), currently has a Zacks Rank #3 (Hold).
COSTCO WHOLE CP (COST): Free Stock Analysis
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