Shortages of Phone Hindering Sprint 4G

Posted: July 15, 2010 in Business, Technology

by Niraj Sheth
Wednesday, July 14, 2010

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Sprint Nextel Corp.’s (NYSE: SNews) big bet on its super-fast 4G network is running into stronger-than-expected head winds, Chief Executive Dan Hesse said in an interview.

Sprint is still the only U.S. carrier with a 4G network, which offers users faster speeds for data and video. The carrier, the nation’s third-largest by subscribers, hopes the network will give it an advantage in attracting customers from rivals. But shortages of its maiden 4G phone are limiting potential sales, and rival carriers are getting closer to launching their own 4G networks.

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“We thought we would have more of a head start than we’ll end up having,” Mr. Hesse told The Wall Street Journal last week.

In a sign of the network’s importance, Sprint recently moved to tie executive compensation more closely to the company’s success with 4G. The weight Sprint gives to 4G subscriptions when calculating executives’ bonuses was boosted to 20% from 10%, the company disclosed in a filing last week.

So far, Sprint has sold 300,000 of its Evo 4G phones, according to Macquarie Group. Demand has been strong, but HTC Corp. (OTC BB: HUTC.OBNews), the Taiwanese company that makes the Evo for Sprint, hasn’t been able to keep up. The spotty shortages that developed after the phone went on sale in early June have become widespread.

Now, the Evo 4G is delayed without a ship date, according to Sprint’s Web site. The Evo is Sprint’s main way to attract 4G subscribers, although it also does so with data cards for use in computers.

“The early move to 4G has benefited Sprint from a marketing perspective, but it hasn’t really proven out in a major way in subscriber growth,” said Dan Hays, a telecom partner at consulting firm PRTM.

Sprint doesn’t break out its 4G subscriber numbers. Clearwire Corp. (NasdaqGS: CLWRNews), which is building the new network and in which Sprint owns a 56% stake, had 157,000 customers on the network from companies including Sprint at the end of the first quarter. Altogether, Sprint has 48.1 million wireless customers.

The Evo shortages are the latest for HTC, whose Droid Incredible on Verizon Wireless, a joint venture of Verizon Communications Inc. (NYSE: VZNews) and Vodafone Group PLC (NYSE: VODNews), has also been plagued by shortages since shortly after it launched in late April.

The shortages stem from not having enough parts made by other suppliers, HTC says. Analysts say there’s a particular dearth of the Samsung Electronics Co. touch screens the HTC phones use. Samsung is building a $2.2 billion factory to make the screens, but it won’t start operations before 2012.

For future devices, HTC has added more suppliers, recently signing a deal with Sony Corp. (NYSE: SNENews) for screens for a new HTC phone. The company is also checking flights to the U.S. to see if it can secure extra, last-minute carrying space to get more phones to Sprint and Verizon shelves as soon as phones are ready, said HTC spokesman Keith Nowak.

Because of the recession “last year, general high-tech capacity was taken offline and now it needs to be brought back up,” says Sprint’s Mr. Hesse. But, he adds, handset manufacturers can bounce back from initial shortages soon to meet demand.

In the meantime, rivals are getting closer to launching their own 4G networks. Verizon Wireless expects to turn on its new network in some markets by the end of the year. AT&T Inc. (NYSE: TNews) will start rolling out its new technology next year.

Sprint’s network hasn’t yet made it to key cities, such as New York and San Francisco. In other cities, such as Washington, D.C., the coverage isn’t city-wide. Clearwire has said it expects to turn on the network in New York by the end of the year.

Write to Niraj Sheth at niraj.sheth@wsj.com

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Comments
  1. marcturner says:

    This is Crazy – That is a Hot Phone and I tell you what – We can’t keep them either in My Business – People are Just Buying this EVO Like Crazy –

    Make sure that you check out the results @ http://www.moneytraintechnology.com

  2. flights to rhodes says:

    ahhhhhh very good, bookmarked 🙂 keep it up, JusyKassy. http://www.flightsrhodes.org

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