) primarily competes with Verizon (
) and AT&T (
) in the mobile business. Mobile internet constitutes 40% of our
estimated stock value for Sprint, roughly equivalent to the 43%
contribution from mobile phones and plans.
We maintain a
price estimate of $4.35 for Sprint
, in line with market value.
2011 - 4G Product Launches on the Horizon
While Sprint has been expanding its 4G coverage, it has also
been launching devices that can take advantage of this faster
network and promote a better data usage experience for customers.
HTC EVO 4G and Samsung Epic 4G have been two such successes for the
Sprint recently announced a 2011 target for launch of tablets
capable of connecting to its 4G high-speed wireless network. The
move could produce upside to Sprint's recorded revenue per
subscriber, as new subscribers join Sprint's network and existing
subscribers add premium high-speed data plans to their service.
Upside to Sprint's Data Revenues
We currently project an increase in Sprint's monthly internet
and SMS revenue per subscriber from $15 in 2010 to $17 by 2013,
with a similar increase expected through 2016. Comparatively, when
Sprint began selling Samsung's Galaxy tablet in November, data
plans were offered at monthly rates between $30 and $60.
Using these rates as a proxy for 4G tablet data plans in 2011,
we note that a higher mix of tablet sales in the years ahead could
drive Sprint's recorded internet and SMS revenues per subscriber
beyond our base estimates. Further, since we define subscribers on
a per person basis (rather than per device), the likely trend of
existing customers adding tablet data plans to their service could
create even greater upside to this metric.
Drag the trend-line in the chart above to assess the impact
of changes in Sprint's internet and SMS revenue per subscriber on
the company's stock value.
A 20% increase in internet and SMS revenue per subscriber beyond
our estimates by 2013 could add about 17% upside to
our current $4.35 price estimate
Data revenues are primarily driven by smartphone usage, but the
growing popularity of tablets has incentivized many mobile carriers
to add these to their arsenal. While Sprint has benefited from
improved smartphone selection, the company is now emphasizing the
release of 4G compatible devices and placing its bet that 4G WiMax
will not only drive better data usage growth, but also spark a
turnaround in subscriber losses.
See our full analysis for Sprint here