sprintSprint got a lukewarm vote of confidence from influential telecom financial analyst Craig Moffett on Friday. In a Moffett Nathanson Research note, Moffett and Nick Del Deo said, “We actually think Sprint’s turnaround is going to work. It’s just that it will take a long time.”

Sprint’s unlimited plans will resonate, the researchers said. But the company needs to complete its Sprint Network Vision plan to consolidate networks using different technologies onto a single network including construction of its 2.5 GHz network, they said. And that will take time.

Sprint was struggling when it gained a cash infusion from Softbank last year – and many people expected to see Sprint’s prospects improve. But Sprint wasn’t the only carrier to see its prospects improve. The future also started looking better for T-Mobile, which gained spectrum from AT&T and merged with MetroPCS.

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In a market that had become increasingly dominated by Verizon and AT&T, it seemed that both Sprint and T-Mobile had the opportunity to make inroads.

But T-Mobile is in a stronger position than Sprint for now, the researchers said.
Although Sprint’s network costs are sometimes viewed as its handicap, the company’s real problem is network cost as a percentage of service revenues, said Moffett and Del Deo. Sprint’s costs are considerably higher than T-Mobile’s measured by that metric.

Additionally, Sprint subsidizes customer handsets at a rate of 13.5% of service revenue, compared to just 3.6% for T-Mobile. “In essence Sprint spent an extra 10% of its revenues bribing its customers not to leave,” the researchers wrote.

The analysts believe Sprint may need to cut costs to minimize subscriber losses. “Addressing the value proposition problem via network improvements alone will take longer than management is likely willing to wait,” said Moffett and Del Deo. But if the company cuts prices, its financial performance will be weakened, the researchers noted.

Turning Sprint around will take two to three years or more, the researchers said.

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