Can Sprint Grab Market Share with 4G Tablet Release?

Sprint (NYSE:S) primarily competes with Verizon (NYSE:VZ) and AT&T (NYSE:T) in the mobile business. We estimate that mobile internet constitutes about 40% of Sprint’s stock, just under the 43% estimated contribution from mobile phones and plans. Our price estimate of $4.35 for Sprint stock is roughly in line with its market value.

Sprint recently announced a 2011 target for launch of tablets capable of connecting to its 4G high-speed wireless network, a move that could strengthen Sprint’s product offering and help maintain its 4G lead as competitors ramp up on their own 4G launches. ^[1]

Tablets’ Emerging Popularity

Tablets have been extremely popular amongst consumers lately and can certainly be labeled one of the hottest new gadgets in the market. According to Gartner forecasts, worldwide tablet sales could reach 19.5 million units in 2010. ^[2]

The growth in 2011 and beyond is likely to be strong and Gartner anticipates that global tablet sales could surpass 208 million by 2014. ^[2] Additionally, eMarketer estimates that the U.S. will continue to command a majority share of global tablet sales till 2012. ^[3]

Can 4G Tablet Trigger a Subscriber Turnaround?

While the majority of tablet growth is likely to come from Apple’s (NASDAQ:AAPL) iPad sales, we anticipate that its share will decline over time. Clearly, tablets are gaining major adoption and a successful 4G tablet from Sprint could leverage this trend and drive improvements in subscriber revenues. If Sprint’s new 4G device offerings were to spark a rebound in Sprint’s CDMA subscriber share of the U.S. wireless market to 2007 levels by the end of our forecast period, our price estimate could see about 12% upside.

Modify the chart below to see how a faster rebound in CDMA subscribers can affect Sprint’s stock value.

It is necessary to note that a successful tablet launch for Sprint is not devoid of risks that could moderate any upside. A major risk for Sprint stems form intensifying competition in the tablet market that could threaten potential market share gains. Verizon and T-Mobile are planning to launch their own 4G devices while AT&T is likely to join the bandwagon somewhere in mid-2011.

See our full analysis of Sprint here

1. See: The Wall Street Journal: Sprint, T-Mobile to Sell 4G Tablets Next Year [↩]
2. See: Gartner Press Release: Gartner Says Worldwide Media Tablet Sales on Pace to Reach 19.5 Million Units in 2010 [↩] [↩]
3. See: eMarkter: iPad Sales to More Than Double Next Year [↩]