The third-largest U.S. wireless carrier Sprint Nextel Corp. (S) will launch a 4G handset “HTC EVO 3D” and 4G tablet “HTC EVO View 4G” on June 24.
HTC EVO 3D America's first glasses-free 3D 4G device, will be priced at $199.99 and HTC EVO View 4G, the first 4G tablet, will be priced at $399.99. Both devices will use Clearwire Corp.’s (CLWR) mobile WiMax (a wireless broadband technology) network.
The company offers more 4G products than any other wireless carrier in the U.S. Sprint’s 3G/4G netbook and notebook, MiFi 3G/4G Mobile Hotspot, Overdrive Pro 3G/4G Mobile Hot Spot, BlackBerry 4G PlayBook and three 4G smartphones –– EVO 4G, Samsung Epic and HTC EVO Shift 4G are gaining popularity in the U.S. market. In addition, the launch of 4G tablet –– the BlackBerry 4G PlayBook –– and another handset –– the Nexus S 4G –– are on the company’s cards this year. These devices are expected to boost margins and earnings going forward.
Sprint will retain its primary focus on 4G networks, which have high prospects in the wireless market. The company is trying to compete with Apple Inc.'s (AAPL) iPhone, which is being sold by its largest rivals AT&T Inc. (T) and Verizon Communications (VZ).
However, we belive Sprint is now no longer the only major carrier offering 4G network. The company’s market advantage for its 4G wirelesss service eroded as other carriers started offering competitive services. Verizon already coveredapproximately 38 markets with around 110 million people by the end of December 2010. Additionally, AT&T plans to roll out its 4G services in summer.
Further, Sprint’s business may be at risk with the proposed AT&T/T-Mobile merger, as it will increase competitive pressure among the top three U.S. wireless operators. The merger might bring the turning post-paid wireless business to a halt and shrink Sprint’s profitability. Additionally, increased competition, heavy investments and continued wireless margin pressure may keep the stock range-bound in the near term.
On the other hand, Sprint has started gaining ground following new contracts wins, the appointment of the new CFO and resolved wholesale pricing dispute with Clearwire. We believe the company will generate higher revenue due to increased penetration of handsets, lower churn and better ARPU. Further, Sprint’s network modernization project is expected to generate substantial synergies over the next few years. We believe all these factors will serve as a major catalyst to Sprint’s growth plan going forward.
We are currently maintaining our long-term Neutral recommendation on Sprint supported by the Zacks #3 (Hold) Rank.
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