Sprint Nextel (S)

Sprint has a weak customer base being run out of the company because of terrible customer service. In addition, the existing customer base is exposed to a potentially slowing economy, which would only increase the rate of defection from Sprint. The churn and customer satisfaction is poor, especially customer satisfaction. Despite Sprint's claims of improvement in customer sat during the quarter, at least one index places Sprint substantially below the competition. Although so many factors influence churn, such as network reliability, RF coverage, features, handsets, apps, etc., the customer experience with care and at the retail level is one where Sprint appears to continue to disappoint in a big way. The customer experience is the single biggest hurdle to overcome in Sprint's turnaround and is the primary reason for continued poor churn and net add performance, despite having finally gotten a handle on network and billing issues.

Sprint (S) recently reported a worse than expected loss of a half-billion dollars. To top it off, they've lost 1 million customers since the end of 2007.

Here at ChangeWave, our surveys have been tracking Sprint's long, steady decline for almost two years. Looking at our March 2008 ChangeWave survey of 3,597 consumers, only 11% said they currently use Sprint as their provider - a number which pales in comparison to Verizon (VZ; 31%) and AT&T (T; 28%).

There's other bad news for Sprint: our findings show Sprint customers to be the least satisfied of all of the major providers.

To make matters worse, when we asked Sprint customers how likely they were to change service providers in the next 6 months, a relatively high percentage (21%) said they're Likely to switch - compared to just 10% of Verizon customers and 11% for AT&T's.

Moreover when people do change cellular service providers, very few are switching to Sprint (3%).

Sprint's stock price has dropped precipitously over the past two years in tandem with their poor performance in our surveys, although they've recently gained back some ground.

Might their "Simply Everything" ads or their WiMax deal with Clearwire be making investors more optimistic?

Sprint Nextel management issued weak 2007 guidance reflecting lower ARPUs and increased spending to stabilize market share. Moreover, Sprint Nextel (S) continues to look for partners to share the cost of the WiMAX rollout, which will undoubtedly cost several billion dollars, but still has no takers.

Given the credit markets being what they are and, for all intents and purposes, a recession in place, major deals that might have been possible six months ago seem like longer shots now. The prospect of Sprint spinning off WiMAX completely to Clearwire (CLWR) or iDEN or being taken over outright, given the intrinsic value of Sprint's spectrum holdings alone, may not happen now in the short term due to macroeconomic conditions.