Kansas City-based Sprint Nextel Corp. and Ericsson Inc., a global telecommunications company based in Sweden, are teaming up in a seven-year contract that is valued between $4.5 and $5 billion.
Ericsson will assume responsibility for managing Sprint’s wireless and wireline networks, which could free up Sprint’s workforce to focus on enhancing its services and leveraging its newest Palm Pre smart phone. While Ericsson will manage the network, Sprint will continue to retain control and ownership.
P.J. Louis, who runs a consultancy that provides business and operational advisory services to telecom, media and technology firms, said the deal fits into Sprint’s content provisioning and management strategy.
“Telecom is changing; it is no longer about minutes of use for voice or data; it is rapidly becoming about charging for the value of telecom services and media services,” Louis wrote for the New York Times. “I am amazed that Sprint was able to spend so much time and cash managing two disparate networks – Sprint and Nextel. The retention of Ericsson will eliminate a management headache for Sprint.”
The groundbreaking partnership is a game changer for the telecommunications industry, as it marks the first time a U.S. operator has outsourced its network operations – a practice that is common in Europe. With the complexities of operating a multi-faceted network out of the way, Sprint may have positioned itself as a much more aggressive competitor, enabling it to pour more capital into enhancing its other technologies and services.
According to a 2009 Novarum, Inc., analysis published in PC World, Sprint already leads the industry with the most reliable 3G network (although it’s now working on 4G). The test examined more than 5,443 individuals from 283 locations and 13 major cities, including New York City, San Diego, Denver, Phoenix and Chicago. Results showed that Sprint’s 3G network delivered a solid connection in 90.5 percent of major cities. Verizon provided a strong connection in 89.8 percent of the same cities and AT&T, which markets the iPhone, provided an uninterrupted connection in only 68 percent of major cities.
Sprint will now hand over the day-to-day responsibilities of managing this formidable network to a company that specializes specifically in network operations. Ericsson already handles more than 100 networks that cover about 275 subscribers worldwide. This is also an enormous opportunity for the European company to prove its viability in the U.S. telecommunications market. The contract could provide a win-win situation for both companies if the partnership succeeds down the road.