Sprint's take on Networx

What are the Sprint executives saying to Sprint insiders about its failure to get on the Networx contracts?

Well, here is what H. Leon Frazier, senior vice president of Sprint Nextel's enterprise/public sector division, told his people:

Many of you know that Sprint Nextel didn't win the Networx Universal program as prime bidder. Networx Universal is the wide-ranging telecommunications and networking services and technical solutions package to all federal government agencies. AT&T, Verizon, and Qwest won the bid. Sprint won as a subcontractor to Qwest for wireless services.

The media has reported this development as a contract in the range of $20B to $40B. In truth, it's a "hunting license" contract much like our other contracting vehicles, and guarantees little more than the customer not having to go out to bid.

The Networx Universal contract included both wireless and wireline elements, with today's contract primarily impacting Federal Wireline business from FTS2001 which is about $300 million annually. Of this amount, approximately $200 million of the base can be attributed to legacy platform ATM and frame relay, toll free and private line -- platforms and services we are de-emphasizing as we move to an IP-based portfolio. As you know, Sprint's strategy, and investment and focus on network performance hinge on this IP-based direction, and moving away from less economically viable options such as those legacy platform offerings. Consequently, the most difficult task for our bidding team was having to bid the ATM, frame relay, toll free and private line components. We priced accordingly, given our strategic direction.

Our Region 7 iDEN wireless contract is still active as well as our FTS2001 Bridge contract and our GSA schedule, so we shouldn't see short term revenue losses with today's news. Sure we're disappointed for the team who worked so hard on this bid. And we're disappointed for our customers who have enjoyed our outstanding services for 18 years.

We'll continue offering services to the government, and working as a partner with the government. -- This loss will not have an immediate financial affect on Sprint Nextel: however, it could affect morale, so educate your teams on the company's strategy going into this bid. Our strategy as a company is to make our OIBDA (operating income before depreciation and amortization) targets and not sell new business at unacceptable margins. Manage the issue to keep your staff focused.

Looking forward, a Networx Enterprise bid that focuses on wireless and IP will be awarded in May. Given our strategy and our offers, we'll be much more aggressive and in a more favorable position to win this business. We'll prove to the government that with our breadth of capabilities, differentiated products and services, we're the best provider of wireless and wireline services.