Sprint Positioned for Revenue Upside in 2011

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Sprint ( S ) primarily competes with Verizon ( VZ ) and AT&T ( 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 carrier.

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



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: S , T , VZ

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