Potential 15% Upside to Sprint from Higher Internet & SMS Revenue
The average Internet & SMS revenue earned by Sprint Nextel (NYSE:S) from each mobile subscriber has been rising. We estimate Sprint’s stock will benefit as the upward trend continues, driven by rising smartphone use. Sprint competitors AT&T (NYSE:T) and Verizon (NYSE:VZ) are also experiencing rising data revenues. We estimate that Sprint’s Internet & SMS business accounts for about around 43% of the $4.79 Trefis price estimate for Sprint Nextel’s stock, which is about 6% above the current market price of around $4.50.
Internet & SMS Revenue Per Sprint Mobile Subscriber has increased from $2 per month in 2003 to $14 per month in 2009 [1]. Mobile data usage has sky-rocketed with marked improvement in connectivity speeds and reliability. Data usage not only includes traditional SMS or text messaging, but also higher bandwidth activities like sending emails, surfing the internet and viewing video clips.
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Smartphone integration with social networking sites like Facebook is also making it more likely that users will exchange data through smartphones. For example, smartphone users can easily upload images and videos from their mobile phones to social networks.
The average of forecasts for Internet & SMS Revenue Per Sprint Mobile Subscriber created by Trefis members indicated a projected increase from around $20 per month in 2010 to $21 per month by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from $15 per month in 2010 to around $19 per month by the end of the Trefis forecast period. The member estimates imply an upside of 15% to the Trefis price estimate for Sprint Nextel’s stock. We expect the data revenue per user growth to continue, but the rate of growth should slow down as the data user base expands.
Our complete analysis for Sprint Nextel’s stock is here.
Notes:
1. Estimated based on common data plans listed on Sprint’s website and Fee Per Subscriber as reported in the company’s SEC filings. Fee Per Subscriber includes SMS, Internet and voice communication components.