Sprint seeks to boost wireless, focus more on data
NEW YORK -- Sprint, steering clear of the kind of restructuring plans its competitors have recently announced, said last week it will look to bolster its wireless business while shifting its fixed-line unit's focus to data and Internet services.
"We must continue to build PCS into a wireless powerhouse and transition FON Group into a high-growth, data-driven business," said William Esrey, Sprint's CEO, during a teleconference from Sprint's annual investment meeting in New York. PCS is Sprint's wireless division, and FON its fixed-line division.
Sprint, like AT&T and WorldCom, suffers from lagging long-distance revenue and increased competition. Although AT&T and WorldCom have chosen recently to split their business units, Sprint has decided to keep its corporate structure intact by trying to increase revenue for its two units with an influx of capital for infrastructure improvements and a new focus.
"I think it was fully expected," says Jeff Moore, a senior telecom analyst for Current Analysis. "They [data and Internet services] are growth markets as opposed to long-distance, which is pretty much what the market is expecting. I think that Sprint has a stronger hand to play compared with AT&T and WorldCom because they have a stronger balance of assets."
FON Group's revenue mix will shift from voice to data and Internet services, Esrey said. Currently, 70% of its long- distance revenue comes from voice, and 30% from data and Internet services, while in the local operations 90% of revenue comes from voice and just 10% from data and Internet services. But by 2003, half of FON Group's revenue will come from data and broadband services, he said.
The fixed-line group's Internet and related services account for about $1 billion in annual revenue, and the firm anticipates this will increase to $5 billion by 2003.
Growth will be driven by expanded transport capabilities, Web hosting, value-added services such as managed network services and applications, as well as global IP services.
Sprint's international expansion will focus on development of centers in Europe and Asia to better address the Internet business market and multinational companies.
In the U.S., Sprint plans to deploy local fiber rings in 20 major markets. The company will utilize fiber-leasing arrangements to reduce its access costs, according to a company statement. In total, the FON unit's capital investment is expected to increase to $6.2 billion in 2001 compared with $5 billion in 2000, the company predicts. Nearly $1 billion of the new initiatives will focus on expanding wireless broadband multichannel, multipoint distribution service and DSL capabilities, and develop broadband product applications.
Sprint forecast within five years about 60% of the PCS unit's consumer base, and nearly all of its business customers, will be using wireless Web services.
The resulting Internet services revenue is expected to offset any anticipated erosion of voice revenue caused by pricing pressures.
Evans is a correspondent with IDG News Service.