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Sprint Nextel Corporation - Socially, Evironmentally, Ethically Responsible Business Practice

Sprint Nextel Corporation - Socially, Evironmentally, Ethically Responsible Business Practice

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Research paper analyzing the Sprint Nextel Corporation through the Graziadio School of Business and Management "SEER Lens": A certification for Socially, Evironmentally, Ethically Responsible business practice.
Research paper analyzing the Sprint Nextel Corporation through the Graziadio School of Business and Management "SEER Lens": A certification for Socially, Evironmentally, Ethically Responsible business practice.

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Published by: Jessica C on Apr 11, 2011
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Sprint Nextel Corporation

A SEER Lens Approach

Jessica J. Chen April 11, 2011 Graziadio School of Business & Management OTMT 645 Professor Michael Crooke

Executive Summary

A company is truly sustainable when it operates as a Socially, Environmentally, and Ethically Responsible (SEER) business.It must excel in all four components of the SEER lens: quality product or service, financial strength, corporate social responsibility, and environmental stewardship. Ideally, these values are embedded into the company¶s mindset and collectively shape every decision it makes.Exhibit 1 illustrates the interconnectivity of the four quadrants each quadrant has its degree of relation to most, if not all, business strategies. Therefore, company initiatives should be formulated using the SEER mentality to ensure all vital factors are considered. Sprint Nextel Corporation is a Fortune 500 telecommunications company that has experienced its share of struggles during the past five years. This report evaluates the company by discussing its market strategies through the SEER lens and provides a competitive analysis. It concludes with recommendations for Sprint as the company moves forward into exciting new ventures.

Company Overview

Incorporated in 1938, Sprint Nextel Corporation is mainly a holding company, with most of its operations conducted by subsidiaries. Its headquarters are in Overland Park, Kansas and it operates in the United States as a wireless company using CDMA technology. It was the first to provide wireless 4G service from a national carrier in the United States and owns a global long distance Tier 1 Internet backbone. The company offers a wide range of wireless and wireline communications products and services used by individuals, businesses, and the government.


Sprint acquired Nextel Communications in 2005 and owns Boost Mobile® and Virgin Mobile®, both of which offer prepaid price plans including unique nationwide monthly unlimited, pay as you go, and $1 per day chat plan options. Sprint Nextel also provides a host of wireline voice and data communications services including Internet Protocol, or IP, wide-area network and long distance services. The company served more than 49.9 million customers at the end of 2010 and is proud to be ranked No. 6 by Newsweek in its 2010 Green Rankings.

Market Strategies

As an established company, it comes as no surprise that Sprint has embraced all four SEER values to some degree. However, some areas are better managed than others, which will be discussed in the following analysis.


In the quality product and service quadrant, Sprint scored a B rating.The company is mainly a service-oriented business offering wireless and wireline coverage plans to approximately 50 million customers. Since the acquisition of Nextel, Sprint has struggled to operate the two incompatible wireless networks under one management team. According to the Associated Press, the acquisition was ³widely hailed as one of the most disastrous deals in the telecommunications industry.´ Nevertheless, the services provided by Sprint are on par with the other industry leaders, which include an extensive 3G network, national push-to-talk network, the latest 4G services, and all-digital long distance services. The accompanying contract-based and prepaid wireless price plans available through Sprint are comparativelyaggressive. For example, its ³Any Mobile Anytime´ feature of the ³Everything Data plan´ is among the most cost-effective options available on the market.Users are allowed unlimited domestic calls to any cell phone regardless of the carrier, unlimited data usage on the web, and unlimited text messaging ±all for the low monthly charge of $69.99.Sprint places an emphasis on providing the best service at the lowest cost, which is evident in its marketing.Most all of itsadvertisementsattempt to drive home the message of delivering the best network with hassle-free, all-inclusive packages at budgetconscious prices.Today, the quality of the wireless service available to consumers is almost indistinguishable from provider to provider. It has become a necessity rather than a point of differentiation for Sprint to be on the forefront of wireless technology. As such, Sprint is focusing too much on telling consumers how great their service is when in fact, these claims do not appeal to its target market. In addition to the services Sprint provides, it offers products in the form of smartphones, mobile broadband devices such as aircards, laptops to be used with its voice and data services, accessories, and more. At first glance, this suite of products looks no different compared to other wireless and wireline carriers. However, rather than paying attention to market trends, Sprint has failed to deliver the coveted handsets and user experience that the current tech-savvy generation


craves.Competitors likeVerizon, T-Mobile, and AT&T have consistently secured deals with trend-setting handset companies like Apple, RIM, Samsung, and HTC, who continually raise the bar in product functionality and compatibility. On the other hand, Sprint has been busy making deals mainly with Sanyo and Kyocera, only adding more popular devices from Samsung, LG, and Motorola post-craze. This misguided direction has and continues to cost the company millions in lost revenue.But the situation is not entirely hopeless: recently, Sprint has introduced a handful of promising products that could turn this ship around.The company was the first in the U.S. to offer a 4G phone, the HTC EvoŒ, which was recently named Best Phone by CNET. It is currently in the pre-order phase of the cutting-edge Nexus SŒ 4G from GoogleŒ. It also launched the Samsung Restore in April 2010, Sprint¶s third eco-friendly device that received a rating of 3.5 stars from CNET for its innovation, recyclable materials, and industry-standard features.Overall, Sprint¶s respectable service offerings paired with its unattractive suite of products earned the company a B rating in the product and service category of the SEER lens.

In the financial strengthquadrant, Sprint Nextel scored a C rating. Over the past decade, the company faced multiple significantincidents, including the acquisition of Nextel Communications in 2005 and the departure of Chairman and CEO, Gary D. Forsee in 2007.Just as the company struggled with adjusting to the changes, the economy took a turn for the worse. Sprint was certainly not exempt from the effects of the recession as its stock dropped from $22.15


a shareto a mere $1.58 from 2007 to 2008(See Exhibit 2). Since then, Sprint¶s stock has been trading steadily around $4.25.

To better understand the acquisition and its financial implications, consider its market capitalization. At the time of the deal, Sprint had a market capitalization of approximately $33 billion, as did Nextel. In 2008, the combined company had a market cap of under $30 billion. Today, this figure has shrunk to $14 billion. From an operational standpoint, the situation only worsened. According to the Wall Street Journal, Sprint Nextel lost 1.2 million postpaid subscribers in 2007 alone, with one of the highest churn rates in the industry. This statistic is disheartening, bearing in mind that Nextel had one of the lowest churn rates prior to the merger.To make matters worse, Sprint had ³disproportionate exposure to some of the same highrisk customers´ that had defaulted on their mortgage loans.

The good news is that Sprint Nextel reported an increase in its quarterly revenues in October 2010, the first increase in three years. Revenue rose 1% to $8.15 billion, up from $8.04 billion in 2009.Due to the decline of the Nextel operations, Sprint continued to lose contractbased subscribers, which are the most profitable. Its walkie-talkie phoneswere popular with bluecollar workers and other professionals, but the Nextel network did not work well with smartphones, killing the core Nextel customer base.

Sprint recognized that there was an underserved market of customers who needed cheaper solutions to owning a cell phone, especially during this period of time when unemployment rates and foreclosures skyrocketed. It began a new strategy in May 2010 to boost its prepaid subscriptions, offering more bargain-priced plans that target middle-aged Americans who only make occasional phone calls and younger users who primarily text versus make calls. In the first quarter of 2010, Sprint lost about 578,000 contract-based customers but gained 348,000 new ones through its prepaid plans. The company breaks even on a prepaid customer after half a


year, twice as fast as a contract-based customer. However, since they pay less monthly and are not locked into a contract, sales from the prepaid wireless sector are not sufficient for Sprint to be financially sustainable.

In 2006, Sprint Nextel was ranked No. 59 of the Fortune 500 list of America¶s largest corporations. Their revenue for the year was $34,680 million and reported $1,785 million in profits. Last year, the company¶s revenue was $32,260 million and its loss was -$2,436 million, dropping its ranking toNo. 67.Sprint¶s current return on assets is -11.30% and return on investments is -16.20%, demonstrating ineffective management.Prepaid customers are currently the main growth segment in the wireless market, but Sprint cannot count on this segment to restorethe company¶s financial health.This is proven by its current profit margin of -10.60%. Due to its financial instability, poor management of the acquisition, and unsustainable response to the weak economy, Sprint earned a C rating in the financial strength category of the SEER lens.

In the corporate social responsibilityquadrant, Sprint Nextel scored an A rating.Below is a direct quote taken from the company¶s website that describes its approach to corporate responsibility:

A company is much more than the products and services it sells; the effect a company has on the environment, the people and the communities it serves reflects the company¶s dedication to being not only a good business, but to being a good corporate citizen.


And Sprint, a veteran in citizenship efforts ranging from wireless recycling and renewable energy in its networks to its character-education grants program is fully engaged in ensuring it does its part to incorporate corporate responsibility into every major touchpoint of its business.

This CSR-based mission is stated attractively in theory, but the real evidence of success in this SEER value can be found in the many supported company initiatives. Although Sprint has been giving back to its community for many years, it realized a need for a committee dedicated to organizing these initiatives and established the Corporate Responsibility Steering Committee in 2008. The committee is comprised of individuals including the CEO, CFO, and VP of HR. Sprint published its one and only CSR report in 2007 and plans to release its second one in June 2011 which will include an interactive GRI index.

Sprint strives to take good care of its employees including health, wellness, and safety. For example, when the current headquarters in Kansas was being built in 1997, it was important to the company to include a state-of-the-art fitness center that now offers a host of group exercise programs and healthcare services.The company is committed to workforce diversity and has received much recognition for this commitment to inclusion. A couple of Sprint¶s notable accomplishments include being named one of Forbes¶ Top 20 Most Responsible Companies in Diversity Initiatives and receiving a perfect 100% score on the Human Rights Campaign¶s annual Corporate Equality Index for three consecutive years.

Externally, Sprint has made strides in customer service satisfaction by better managing the entire customer service experience. Consequently, the company has won the Wholesale Excellence awards for brand, provisioning, network and customer service ± more awards than any other U.S. carrier given by research firm Atlantic-ACM.It also earned 2nd place in a retail satisfaction study conducted by J.D. Power & Associates, ahead of AT&T and Verizon. Business practices aside, Sprint supports its local communities through the Sprint Foundation, which was founded in 1989. This foundation currently focuses on key employee communities such as


Kansas City, Chicago, and Los Angeles. It uses direct grants and employee contribution matching to support K-12 education, the arts, and youth mentorships. The latest public information provided by the company shows that the Sprint Foundation grants totaled over $6.5 million in 2008.Sprint¶s long tradition of corporate social responsibility proves that this SEER value is fully embedded into the company¶s DNA, earning it an A rating in this quadrant.

Closely related to corporate social responsibilityis the environmental stewardship component in which Sprint Nextel scored a B rating. Sprint reportedan overall reduction in its environmental impact of its products and services, but admits that it is working on developing a clear, measurable metric for determining this impact quantitatively.This may be a large reason why Sprint has not released a second CSR report since its first in 2007. Regardless, the company is proud of its recognition in this space ± itwas ranked No. 6 by Newsweek in the 2010 Green Rankings and won the 2010 Sustainability Leadership Award at the International Electronics Recycling Conference. It also took home the PRSA Silver Anvil Award of Excellence for the ³Make it Easy to Be Green´ Program. It has switched to hydrogen fuel cells, boasts offering the most eco-friendly cellphones in the U.S., and is the first U.S. wireless company to announce its greenhouse gas emission reduction goal. From 2007 to 2009, the company calculated a gas emissions reduction of 9% and aims to increase this percentage to 15% by 2017. Since 2001, Sprint has collected about 24 million phones for recycling and currently has a 41% device reuse


and recycle rate. Of the 3.7 million phones collected in 2009, about 90% were reused as refurbished phones. Naturally, as a company that relies on the sale and usage of its devices, Sprint has plenty of room to improve its environmental impact.Because the company has set tangible goals and is already starting to see the results, it earned a B rating in the environmental stewardship category of the SEER lens.

Competitive Analysis

Competitors Sprint

Profit Margin -10.6%

Market Cap $14.14B

Strengths Customer service, CSR,industry pioneer in sustainability, leader in prepaid services Fiberoptics, Largest wireless service provider in U.S. by total customers, Provider of iPhone 4 First provider of iPhone, pending merger with T-Mobile

Weaknesses Effects of Nextel merger, Financial struggles, Weak marketing




Higher price-point, Generally riskaverse (follower)




Weaker wireless network service



Sprint has done a poor job of attracting its target market, the tech-savvy consumers. It has painted an embarrassing picture for itself as the uncool, cheaper knock-off carrier with a bland phone selection. Since the quality of available wireless services in the market is fairly equal between providers, cell phone users no longer consider this as an added value. What appeals to consumers today is the user experience provided by the most innovative brands. The best thing Sprint can do to climb out of the current stagnant rut that it has been in is to claim first provider rights to a lineup of new Android-based smartphones through the big name brands: Samsung, HTC, and LG.The HTC EvoŒ 4G and soon to come Nexus SŒ are two phones that give the resurgence of Sprint a great start. Additionally, Sprint must sever ties, at least temporarily,with the smaller brands such as Kyocera and Sanyothat are dragging down the company image. In doing so, Sprint has a chance at reclaiming market share by properly responding to consumer demand.In support of this fundamental shift in the business focus, the marketing department needs to also shift its focus to bring attention to the exclusivity of its premier product line. From a corporate social responsibility stance, Sprint needs to continue to set its standards high and make it a priority to be involved in its community. By taking care of its employees and supporting the Sprint Foundation, the company is ensuring a more pleasant work environment and fostering brighter local communities.As the company works toward a more stable financial footing, it is not advisable to pump more dollars into these programs for the time being. Sprint must work with its vendors to demand the use of more eco-friendly materials and sustainable packaging for both phones and accessories. Now that the company has three ecofriendly phones on the market, it needs to work on improving the phones¶ functionality ± most customer ratings reveal that the quality and interface of these devices are lacking in technology found in other phones on the market. Then, Sprint can generate more publicity around its EcoLogo that designates wireless devices that score above the necessary benchmark on the Sprint


³eco-criteria´. This set of criteria that the company uses to evaluate its products¶ environmental performance has the potential to become an industry standard.

As Sprint implements these recommendations, it will experience a revival in subscriptions as its highly coveted cell phone selection finally compliments its award-winning service, leading to a financial recovery.

1. Claim first provider rights to a lineup of new Android-based smartphones 2. Stop carrying Kyocera and Sanyo phones 3. Continue CSR efforts 4. Work with vendors to use more eco-friendly materials 5. Improve functionality of eco-friendly devices 6. Publicize Eco-Logo and eco-criteria 7. Closely monitor profits



Exhibit 1


Exhibit 2




Hart, Kim. (2007, Oct 9). CEO leaves, Sprint¶s woes stay. The Seattle Times. Retrieved from http://seattletimes.nwsource.com/html/businesstechnology/2003934957_sprint09.html Moore, Heidi N. (2008, February 1). Is Sprint Nextel Worth Saving?The Wall Street Journal. Retrieved from http://blogs.wsj.com/deals/2008/02/01/is-sprint-nextel-worth-saving/ Salam, Reihan. (2011, March 22). Further Thoughts on AT&T + T-Mobile. National Review Online. Retrieved from http://www.nationalreview.com/agenda/262781/further-thoughtsatt-t-mobile-reihan-salam Sheth, Niraj. (2010, May 6). Sprint Nextel Adds Prepaid Brand, Cuts Prices on Another. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052748704370704575227770663288134.html Sprint. (2011). About Sprint Nextel: News, Investors, Sprint Jobs & Sponsorships. Retrieved from http://www.sprint.com/about/ Sprint. (2011). Corporate Responsibility. Retrieved from http://www.sprint.com/responsibility/ Sprint Nextel Corporation. (2007, September 25). Corporate Social Responsibility Report. Retrieved from http://www.sprint.com/responsibility/environment/docs/csr_report.pdf Sprint Nextel Corporation. (2010). Form 10-K for the fiscal year ended December 31, 2010. Retrieved from http://investors.sprint.com/phoenix.zhtml?c=127149&p=irolreportsannual The Associated Press. (2010, October 27). Prepaid Service Pushes Sprint Nextel Revenue Up. The New York Times. Retrieved from http://www.nytimes.com/2010/10/28/technology/28sprint.html


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