Sprint - Nextel 2007 Annual Report Download - page 24

by a number of factors including, with respect to our wireless business, the actual or perceived quality and
coverage of our network, the attractiveness of our handsets and service offerings and the customer care
experience, including new account set up and billing. Our ability to retain customers also is affected by
competitive pricing pressures and the quality of our customer service. Our recent efforts to reduce churn have not
been successful, and our high rate of churn has impaired our ability to maintain the level of revenues generated in
prior periods, and caused a deterioration in the operating margins of, our wireless operations and our operations
as a whole, the effects of which will continue if we do not reduce our rate of churn. Our ability to retain
customers may also be negatively affected by industry trends related to customer contracts. We and our
competitors no longer require customers to renew their contracts when making changes to their pricing plans and
have announced that we will be moving to prorated early termination fees. These changes could negatively affect
our ability to retain customers and could lead to an increase in our churn rates if we are not successful in creating
a competitive product and service mix.
As the wireless market matures, we must increasingly seek to attract customers from competitors and
face increased credit risk from first time wireless subscribers.
We and our competitors increasingly must seek to attract a greater proportion of new customers from each
other’s existing customer bases rather than from first time purchasers of wireless services. Recently, we have not
been able to attract customers at the same rate as our competitors and have had a net loss of subscribers during
2007. In addition, the higher market penetration also means that customers purchasing wireless services for the
first time, on average, have a lower credit rating than existing wireless users, and the number of these customers
we are willing to accept is dependent on our credit policies, which change from time-to-time. To the extent we
cannot compete effectively for new customers, our revenues and results of operations will be adversely affected.
Competition and technological changes in the market for wireless services could negatively affect our
average revenue per user, subscriber churn, our ability to attract new subscribers and operating
costs, which would adversely affect our revenues, growth and profitability.
We compete with several other wireless service providers in each of the markets in which we provide
wireless services. As competition among wireless communications providers has increased, we have created
pricing plans that have resulted in declining average revenue per minute of use for voice services, a trend which
we expect will continue. Competition in pricing and service and product offerings may also adversely impact
customer retention, which would adversely affect our results of operations.
The wireless communications industry is experiencing significant technological change, including
improvements in the capacity and quality of digital technology and the deployment of unlicensed spectrum
devices. This change causes uncertainty about future subscriber demand for our wireless services and the prices
that we will be able to charge for these services. Rapid change in technology may lead to the development of
wireless communications technologies or alternative services that are superior to our technologies or services or
that consumers prefer over ours. If we are unable to meet future advances in competing technologies on a timely
basis, or at an acceptable cost, we may not be able to compete effectively and could lose customers to our
competitors.
Mergers or other business combinations involving our competitors and new entrants, including MVNOs,
beginning to offer wireless services may also continue to increase competition. These wireless operators may be
able to offer subscribers network features or products and services not offered by us, coverage in areas not served
by either of our wireless networks or pricing plans that are lower than those offered by us, all of which would
negatively affect our average revenue per user, subscriber churn, ability to attract new subscribers, and operating
costs. For example, AT&T, Verizon and T-Mobile now offer competitively-priced wireless services packaged
with local and long distance voice and high-speed Internet services, and flat rate voice and data plans, and our
Boost Mobile-branded services compete with a number of regional carriers, including Metro PCS and Leap
Wireless, which offer competitively-priced calling plans that include unlimited local calling. In addition, we may
lose subscribers of our higher priced plans to our Boost Mobile offerings.
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