Apple’s iPhone 4S Sales Smokin’ But Sprint Has Yet To Catch Fire

Sprint’s stock has been volatile in the past few weeks with the company’s plans to raise additional capital for its 4G LTE network launch next year as well as its announcement of providing unlimited data plans for iPhone subscribers.

While building out its own LTE network infrastructure will bring down Sprint’s long-term costs and help it compete better against ATT and Verizon, it’s also piling up a lot of debt which has prompted Moody’s to downgrade its credit rating.

Meanwhile Apple’s iPhone 4S is selling like hotcakes, registering 4 million sales over the launch weekend, [1] and the strong pick-up in demand will benefit all iPhone carriers, including Sprint.

An unlimited data offering for the iPhone may attract many subscribers to Sprint, which would give a much-needed boost to its declining wireless market share. However, the company has to maintain data speeds and network quality to be relevant in the wireless race; there have been early reports of complaints by Sprint’s subscribers about low data speeds after the iPhone 4S launch. [2]

See our complete analysis for Sprint Nextel’s stock.

iPhone 4S sets record, Sprint others benefit

The iPhone 4S, which was launched on October 14, sold 4 million units over the launch weekend, beating Apple’s earlier record of 1.7 million sales set by the iPhone 4 last year. [1] Sprint, a distant third in wireless market share, is likely to benefit the most with its unlimited data plan offering which is attractive to data hungry iPhone subscribers.

Sprint’s CDMA wireless market share has declined from an estimated 11.3% in 2007 to 9.5% in 2010 amid strong competition from ATT and Verizon and also due to deteriorating customer service. The company is making efforts to develop an independent 4G LTE network to be launched in the second half of 2012, which will ensure better speeds and reduce costs for the company as it will reduce its dependence on WiMAX network provider Clearwire. (Read: Sprint’s Stock Could Double as LTE Plans Spook Analysts) This speed improvement, coupled with the iPhone deal, should help Sprint bring in more subscribers and regain lost market share.

Sprint will need to maintain data speeds to keep subscribers

All of this, however, is contingent upon Sprint maintaining its network quality and data speeds which are critical for retaining smartphone users. Recent reports suggest that Sprint’s subscribers are complaining of slow data speeds since the launch of the iPhone 4 S. [2] If these issues persist, it could drive subscribers away from Sprint and impact the company’s stock price further.

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While we estimate that Sprint’s CDMA wireless market share will increase from 9.8% in 2012 to 11.5% by the end of our forecast period, Trefis members project an increase from 10.4% to 13% during the same period. The member estimates imply an upside of 14% to the Trefis price estimate for Sprint Nextel’s stock.

We currently have a Trefis price estimate of $4.73 for Sprint Nextel’s stock, which is about $2 above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

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