Sprint Changes Collection Tactics as Telecoms Prepare Earnings

The nation’s largest telecom carriers will start reporting their third quarter earnings later this month. Though none have announced their earnings release date, a projection using three months from second quarter releases, AT&T should report around Oct. 23, Verizon a week later and Sprint a week after that.

Jeff Kagan, an independent Atlanta, Ga.-based telecom analyst, expects AT&T and Verizon earnings to grow as the companies gain ground on cable firms by offering triple-play (wired, wireline and broadband) services, but Sprint is likely to struggle with customer churn and collection issues.

“If you look at recent history, it’s pretty safe to say that AT&T and Verizon will see continued growth,” Kagan said. “Sprint is wrestling with reorganizing its customer focus and collections. But Sprint will recover.”

Sprint has had more of a problem with collections than its competitors because the company has taken a volume approach, signing up more customers for generally smaller total bills. These customers have proven more likely to go delinquent or switch to another provider than customers with multiple services (and higher bills), according to Kagan. Indeed, studies in banking have shown that the more services a customer has, the less likely he is to switch to a competitor.

By changing its focus, Sprint should be able to improve on its collections, according to Kagan. The company this month forced out Chairman and CEO Gary D. Forsee who orchestrated in 2005 the $36.8 billion takeover of Nextel. Analysts have estimated Sprint has lost more than a million Nextel customers since the acquisition.

Whereas Verizon has focused on quality and AT&T on growth, Sprint is just now starting to roll out an effective marketing campaign, Kagan said. The telephone companies are all seeking to expand the markets where they offer television service, which is the major reason for growth versus the cable companies, which have seen earnings and stock price declines, Kagan said. The cable companies, such as Comcast and Time Warner Cable, had owned the market for providing high quality television services, but the phone companies started getting approvals a couple of years ago for their own offerings (sometimes in partnership with satellite providers), spurring growth.

Kagan expects the cable versus telecom battle to be bigger than telecom carrier versus telecom carrier for the next several years.