McIntire Investment InstituteAt the University of Virginia

Sprint Nextel

(NYSE: S)

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Prepared by Collin Schweiker| 7 October 2010

Business Overview

Sprint Nextel merger in 2004

Headquartered in Overland Park, KS

Wireless telecommunications provider

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48.2 million customers

3G and 4G service capabilities

Majority stakeholder in Clearwire

Business Overview

3rd largest wireless network in U.S.

4G vs 3G

Growth of prepaid market

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Boost Mobile, Virgin Mobile,

Assurance Wireless

Google/Clearwire

Wal-Mart/Common Cents

Long Position Investment Thesis

Market innovator

Positive growth

Cost leadership

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Experienced, driven management

Renewed public image

Industry-leading CE position

Market Innovator

First-to-market WiMax 4G network

Flagship product: HTC Evo 4G

A prepaid market leader – 11.2 million

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Common Cents pricing structure

Assurance Wireless gov’t program

Positive Growth

Net gain in subscribers Q2 2010

110,000 contracts, first time in 3 years

Projected growth for rest of the year

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4G expansion into new markets

WiMax coverage for 120 million people

521,000+ new prepaid in 2010

(more than Verizon and AT&T)

Cost Leadership

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Source http://www.billshrink.com

Experienced, Driven Management

The Boss: Dan Hesse

Former CEO of AT&T Wireless

Over 30 years in the business

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Customer satisfaction

Brand Recognition

Cash generation

Renewed Public Image

Poor service � high churn rate

Highest improvement in customer

satisfaction by the 2010 ACSI of any

company two years running

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Six #1 rankings by the 2010 Atlantic-

ACM Business Connectivity and

Wireless Excellence Awards

Double industry standard for green

initiatives

Industry-leading CE position

$4.28 billion in cash

Liquidity to take full advantage of 4G

roll out

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roll out

Projected 2010 total of $2 billion in

capital expenditures

Current Stock Information

Share price: $4.65

Market capitalization: $13.74B

P/E: N/A

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P/E: N/A

EPS: -1.04

Cash flow per share: 1.30

P/B Ratios | S: 0.83 | VZ: 2.40 | ATT: 1.59

Risks

Heavily analyzed firm – difficult to

find an edge

Negative earnings

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Negative earnings

Reputation lag

First to market edge inadequate

Misperception and potential edge

Bill Shelton, Director of Business Development at Juniper Systems

Sprint: Long-standing reputation for poor phone service and low

customer satisfaction

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Market misperception of the new Hesse-led Sprint by customers

Improved service, cutting edge technology, and AT&T’s worsening

reputation could all lead to fourth quarter sales exceeding analyst

expectations

Unique business position makes valuation difficult

Potential Catalysts

Deutsche Telekom bid for Sprint Nextel (T-Mobile merger)

Prepaid growth through unlimited plans

Reinforced Google partnership after Verizon iPhone release

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Reinforced Google partnership after Verizon iPhone release

(Clearwire partner)

Sharp increase in net subscribers after fourth quarter 4G release in

new markets

Conclusion and Recommendation

My pitch hinges on analysts’ underestimation of Sprint’s expected performance and a changing market perception of Sprint’s reputation and service quality.

Sprint offers a faster wireless experience with arguably better

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experience with arguably better hardware for a cheaper price.

Sprint is well managed and has turned the corner from its previous market losses.

I recommend a 3% long position

Disclosure: The analyst is long Sprint