In our June report comparing Sprint Nextel (S) to Nokia (NOK), we analyzed the progress of those once-great telecom titans in turning around the weak performance that both companies have been enduring since the beginning of 2006. We elaborated on how both companies were pioneers in the mobile communications industry in that Nokia introduced the first car phone “Mobira Senator” in 1982 and Sprint built the nation’s first national digital PCS mobile communications network from the ground up without the benefit of the Bell System monopoly and the first all-digital, fiber optic telecommunications network. We discussed how both firms saw shocking revenue declines and losses, value-destroying acquisitions and have seen company credit ratings cut to junk during the last five years. We also remembered that both companies have made significant strategic realignments in each firm’s respective business models since the 19th century inception of each firm’s predecessor company (Nokia was a diversified industrial conglomerate and Sprint was a rural local exchange carrier in Kansas). Our thesis underlying the creation of our June report was that Sprint was a better telecom turnaround story, and we were able to conclude that our thesis was met. Here is why we see Sprint continuing to make more progress than Nokia in its corporate turnaround:
Sprint Nextel: We were ecstatic when Sprint came out with its Q2 2012 results because its year-over-year wireless platform revenue grew at a faster rate than Verizon Wireless (VZ) or AT&T Mobility (T). An even bigger positive takeaway with regards to revenue growth between Sprint Nextel versus the AT&T-Verizon duopoly is that AT&T Mobility’s YoY revenue growth rate declined by 60bp for the Q2 2012 period versus what was achieved in the Q1 2012 period. Verizon Wireless’s YoY revenue growth rate declined by 40bp for the Q2 2012 period versus what was achieved in the Q1 2012 period. Sprint Nextel’s YoY revenue growth rate for its wireless operations for Q2 2012 grew by nearly 101bp versus what was achieved in the Q1 2012 period. That confirms our thesis that what Sprint may not be the best wireless communications company in terms of revenues and profits, it has positioned itself to be the best wireless carrier and it is serving to sap the growth rates of AT&T Mobility and Verizon Wireless.