A SEER Lens Approach
Jessica J. ChenApril 11, 2011
Graziadio School of Business & Management
OTMT 645Professor 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.
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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.
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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 “widely 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 comparatively aggressive. For example, its “Any Mobile
Anytime” feature of the “Everything 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 its advertisements attempt to drive home the
message of delivering the best network with hassle-free, all-inclusive packages at budget-
conscious 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
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craves. Competitors like Verizon, 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 Evo™, which was recently named Best Phone by CNET. It is
currently in the pre-order phase of the cutting-edge Nexus S™ 4G from Google™. 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 strength quadrant, Sprint Nextel scored a C rating. Over the past decade,
the company faced multiple significant incidents, 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
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a share to 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 “disproportionate exposure to some of the same high-risk
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 contract-
based subscribers, which are the most profitable. Its walkie-talkie phones were popular with blue-
collar 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
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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 to No. 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
restore the 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 responsibility quadrant, 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.
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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
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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 responsibility is the environmental stewardship
component in which Sprint Nextel scored a B rating. Sprint reported an 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 – it was 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
“Make 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
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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 Profit Margin Market Cap Strengths Weaknesses
Sprint -10.6% $14.14B Customer service, CSR, industry pioneer in sustainability, leader in prepaid services
Effects of Nextel merger, Financial struggles, Weak marketing
Verizon 2.4% $105.62B Fiberoptics, Largest wireless service provider in U.S. by total customers, Provider of iPhone 4
Higher price-point, Generally risk-averse (follower)
AT&T 15.98% $155.41B First provider of iPhone, pending merger with T-Mobile
Weaker wireless network service
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Recommendations
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 Evo™ 4G and soon to come Nexus S™ 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 Sanyo that 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 eco-
friendly 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 Eco-
Logo that designates wireless devices that score above the necessary benchmark on the Sprint
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“eco-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
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Appendix
Exhibit 1
http://bschool.pepperdine.edu/programs/full-time-mba/seer/
Exhibit 2
http://www.sharebuilder.com/sharebuilder/Research/MarketUpdate/Charts.aspx?Symbol=S
References
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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
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Sprint Nextel Corporation. (2010). Form 10-K for the fiscal year ended December 31, 2010.
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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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