The third-largest U.S. wireless carrier Sprint Nextel Corp. (S) has scrapped its plans for launching the BlackBerry PlayBook tablet, a fourth generation (4G) version of Research In Motion Ltd.'s (RIMM) tablet.
Sprint was the first wireless operator to collaborate with Research In Motion for selling 4G WiMax tablets. The cancellation was due to weak demand for the Playbook.
The tablet is unable to cope with the rapid demand for Apple Inc.’s (AAPL) iPads. Even the two largest carriers AT&T Inc. (T) and Verizon Communications (VZ) have not supported the device. Further, BlackBerry’s Playbook will operate only on Sprint’s 4G WiMax network.
Research In Motion has said that it now focuses on 4G network through the deployment of long-term evolution (LTE) technology, which is preferred by both AT&T and Verizon. However, the testing of BlackBerry 4G PlayBook is in progress and would attain network certifications in the U.S. and other international markets by the end of the year.
Both companies have mutually cancelled the launch. Sprint, which offers 4G WiMax services in collaboration with Clearwire Corp. (CLWR), is expected to announce its improved LTE plans in October.
4G services are growing rapidly day-by-day. Sprint will retain its primary focus on 4G networks, which have huge prospects in the wireless market and may boost revenues.
The company’s 4G services covered 71 U.S. markets and reached 120 million people at year-end 2010. The coverage is likely to touch 130 million by the end of 2011. Further, Sprint plans to launch 10 wireless devices (smartphones and tablets) in collaboration with Motorola Mobility Inc. (MMI) by this year end.
We believe an attractive wireless product and service mix, wider 4G network footprint, prepaid brands like Assurance Wireless and Virgin Mobile, Boost Mobile’s Monthly Unlimited plans as well as the Network Vision initiative will continue to add opportunities in the wireless business.
However, we remain cautious due to lower margins in wireless and wireline, higher payments made to Clearwire, higher subsidies and aggravated competitive threats.
We are currently maintaining our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains a Zacks #3 Rank (Hold).
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