Sprint Nextel Corp. (S - Analyst Report) will offer its corporate clients the Managed Telepresence services of Indian telecom giant, Tata Communications Limited . Financial details of the recent contract with Tata were not disclosed.
The collaboration will allow Sprint to combine its cutting edge Multiprotocol Label Switching (MPLS) network with Tata’s most upbeat technological offering, Managed Telepresence, to enhance corporate telecommunication in the U.S.
Sprint’s MPLS is a networks technology which transfers data from one network node to another using label. The technology primarily creates virtual links between distant nodes and combines packages of various network protocols.
On the other hand, Managed Telepresence services include high-definition conferencing facilities with advanced audio and video conferencing services that would virtually create the effect of live face-to-face conferencing across the globe.
A combination of both technologies will enable enterprises to connect its entire operation with their executive offices globally, thereby providing better time management at reduced cost and increase productivity. Further, businesses can deploy such services to enhance and simplify their communications with customers and suppliers.
Given the agreement, Sprint's Telepresence customers will be able to connect to Tata Communications' Global Meeting Exchange, one of the broadest public and private Telepresence networks. Tata’s customers will be able to access Telepresence rooms on the Sprint MPLS network.
Currently, the Managed Telepresence service is rapidly gaining ground in corporate communication and is expected to reach market capitalization of approximately $1.5 billion by 2016 with an annual growth rate of approximately 25%.
Wide adoption of video/audio conferencing and Intercompany Telepresence services fueled the growth of Managed Telepresence solutions. We believe Managed Telepresence services remain well positioned for accelerated growth, creating a revenue opportunities for network service providers like Sprint as it remains the first global carrier in U.S. to achieve the Cisco Telepresence Connection Certification on its MPLS network.
However, companies like Teliris, Polycom (PLCM - Analyst Report), Verizon (VZ - Analyst Report), AT&T (T - Analyst Report) and Iformata Communications, have already marked their presence in the Managed Telepresence market, creating significant challenges for Sprint. However, the Telepresence market is currently at a nascent stage and most of the small and medium businesses remain an underserved market. Hence, we believe Sprint can largely offset competitive pressure by targeting these business units and successfully tapping the emerging market opportunities.
Currently, we maintain our long-term neutral recommendation on Sprint supported by a Zacks #3 (Hold) Rank.