As I read through Sprint's earnings release on Friday, one question kept running through my mind: "Just how long can they keep doing this?" Every quarter, another 2-3% sequential drop in revenues as customers flee. They're going to have to step up and fix the situation soon, else we will get to see what happens when falling revenues meet fixed costs - freefall is the pleasant part, the pain comes when you land.
I can't help but wonder if the Clearwire deal isn't just the first step. Why does Sprint even still have a wireline business if they only spent $81M on capex for it this past quarter? That's 5% of revenues, that's what companies like Broadwing, Global Crossing, and Wiltel slashed their capex to in the darkest part of the telecom nuclear winter. It's a level that can only imply flat growth or worse for a long time, surely those assets and fine customer lists could be put to better use, could generate more shareholder value somehow?
Might Sprint be preparing to separate the wireline business? Hear me out, why should Sprint not do the same to its wireline business as it is doing with XOHM and Clearwire? They could take their wireline business with its $6B in revenues and merge it with someone like Level 3. They could maintain a large equity stake and create a behemoth with $10B+ in annual revenues and the assets to play an independent role in the wireless backhaul game nationwide - a resource Sprint desperately needs. And since the credit crisis has strained the financial position of Level 3, might they be more receptive right now?
Well, it might not actively help them fix their wireless issues, but it might let them focus on them more clearly.