Monnie McGaffigan on leading Sprint's best-kept secret: wireline

View from the Top: Monnie McGaffigan, vice president of wireline, international and strategic alliances, Sprint

Monnie McGaffigan, Sprint

McGaffigan

Monnie McGaffigan, vice president of wireline, international and strategic alliances for Sprint (NYSE: S), believes Sprint's wireline division might be the industry's best kept secret. Given Sprint's emphasis on wireless since purchasing Nextel in 2005, McGaffigan sometimes has to remind even her division's 4,000-strong customer base that it's still got plenty of wireline offerings.

"There's a set of customers out there that answer us frequently with 'I did not know you had that product' and that 'we had no idea you were still in the wireline business,'" she said. "We still have somewhere north of 4,000 wireline customers, but you don't hear about it."

McGaffigan, a 24-year Sprint veteran who took her current post last December, admits that while Sprint's wireline business will never be as big as its larger wireless brother, that's fine with her.

Still, Sprint's wireline business is far from small: It currently generates about $4 billion worth of revenue a year. This revenue pie is broken up into three main pieces: intercompany transfer services, wholesale, and the largest piece, $2 billion, from selling retail services to business customers.

Overall, 2011 has been a decent year in terms of service revenue, says McGaffigan. During the first half of 2011, Sprint reported that wireline Internet revenue increased to $1 billion. Like other service providers, Sprint saw a slowdown in the wireline sales due to the economic slump, but that's picking up again with Fortune 500 companies.

"We've had lots of new logo wins during the first half of this year," McGaffigan said. "Customers are buying wireline services again and we're definitely seeing the fact that we're focused on wireline again we're reaping the benefits there."

Reestablishing the wireline profile
The challenge that Sprint has on the wireline side is trying to up its profile at a time when wireless has become king at the service provider.

McGaffigan admitted that while Sprint never completely gave up on wireline, the overemphasis on wireless sent wireline into a bit of a quiet phase.

"We really stopped focusing on wireline for quite some time and went into hibernation," she said. "For those of that grew up in the wireline space it was like, 'c'mon, we do well in this space and our customers have told us that year over year and we have a differentiated offer with our IP backbone.'"

Reinvigorating Sprint's wireline brand is a priority for McGaffigan and her team.

Joining McGaffigan on the wireline side are Brian Wesolowski, who heads up Sprint's national wireline and master agent organization for the Sprint Business Solutions Partner Program, and Shaun Legerwood, Sprint's director of international sales and global support.

In addition to selling traditional IP/MPLS data products, the wireline group is also selling converged wireless/wireline Unified Communications (UC) leveraging solutions from partners CallTower, to target SMBs, and Smoothstone Communications, to serve enterprise customers.

While the focus of the sales team has been on the wireless products, Sprint is putting more resources dedicated to wireline in places where there had been shared compensation plans. Now the service provider is leveraging both its wireline and wireless field managers to support its channel partners, meaning that wireline agents will be able to get support on wireless deals from the wireless channel sales organization.

Even though Sprint will continue to tout its ability to sell an entire portfolio of wireless and wireline services, McGaffigan said that they will "put more specialized people underneath that so we really represent the wireline portfolio and solution set to our customers in the best light possible."

In April, Sprint's general business team that serves high-end SMBs was selling wireline and wireless services on a shared compensation plan. Since then they have switched things around, so that wireline sales reps sell wireline services and wireless reps sell wireless services.

"We really do have a lot of gas left in the wireline tank," McGaffigan said. "When you start to think about convergence and cloud if you will, it's not a huge leap to start thinking someday a device will be a device and is an IP address that will tie back to that IP core."

Being part of a larger $30 billion company, with only $4 billion focused on wireline, means the bulk of the rest of Sprint's revenue is on wireless.

But even if Sprint wireline does not have the same profile of larger wireline competitors, McGaffigan said if "you took us as an independent company we'd still be a Fortune 700 company since $4 billion is no small chunk of change."

Outside of selling directly to customers, Sprint manages a large base of reseller and channel partnerships with integrators including CDW that serves various verticals.

By expanding these partnerships and giving these groups additional support, McGaffigan said, "we have seen those funnels triple so there does seem to be demand." 

Momentum has been increasing not only domestically, but also internationally where Sprint has been expanding its presence to serve MNCs (multinational corporations) with ongoing network node expansion. Sprint's international wireline efforts have been paying off, gaining the attention of Ingram Micro (NYSE: IM), which won a contract to provide services in the Asia Pacific region.

"Ingram Micro said that while they don't play with us domestically, they asked us to bid on their Asia Pacific region and we won it away from BT and we're now bidding on their EMEA region," McGaffigan said. 

Making the IP switch
As its traditional legacy service revenues decline and its MPLS matures, Sprint is turning its wireline focus on new services, including Ethernet, SIP trunking, telepresence and cloud services.

In 2012, Sprint wireline plans to target what they call the high-end mid-market and low-end enterprise as the "sweet spot."

"These are the forgotten Fortune 5000 kind of customers that are U.S. multinationals that have 1,000 sites," McGaffigan said. "We are finding that we compete very well there from not only a pricing perspective, but also from an account team and service perspective where customers are telling us we are serving them in ways they are not seeing from our competitors."

To achieve its goals in serving these market segments, Sprint will converge on a couple of fronts that are tailored to the Fortune 5000 segment.

From a services perspective, Sprint will deliver off the shelf services with some customization.

Cloud, of course, is on Sprint's mind. Although the definitions of cloud vary widely from offerings like Software as a Service (SaaS), management, or hosting and colocation, Sprint plans to play in all of those spaces in one way or another.

"There's a wide net, but we're actually getting into the space, and we'll probably play in all of those spaces a little bit differently," McGaffigan said.

In the SMB space, Sprint has launched a number of cloud-like services, while in the enterprise space it is going to offer a hosted collaboration suite that includes telephony and other conferencing services through a partnership with an unnamed vendor.

Going forward, the emphasis to provide hosting of nonessential services like e-mail will be on smaller customers via an Amazon.com (Nasdaq: AMZN) type model through its own infrastructure.

"There's a lot being discussed and figured out there, and we're getting much closer to having a very crisp story to tell whether you're an enterprise, SMB or a mid-market customer, here's what we have," McGaffigan said. "Most likely, the cloud thrust will be on the smaller customers to pick up applications like e-mail."

And while cloud concept is relatively new, Sprint has been actually delivering cloud-like services, including colocation and hosting, for over 10 years out of its own data centers.

After selling off data centers that it built out in the late 1990s before the dot-com bust, Sprint did keep four.

"We're looking at what assets we have and can use," McGaffigan said. "This means we have been in this space before and we have plenty of engineering experience, meaning we could make a big splash in this space over the next few years."

Branching out Ethernet
Sprint may be a bit late to the Ethernet services game, but they are certainly far from out of it.

Sprint Ethernet markets, U.S.

While Sprint might not have the same Ethernet presence of AT&T (NYSE: T) or Verizon (NYSE: VZ), McGaffigan said they are "definitely seeing demand for Ethernet access service."

Leveraging fiber and copper facilities, Sprint recently announced an expansion of its Ethernet footprint that's focused on three primary goals: launch new domestic markets, deepen its penetration in existing markets, and expand its global Ethernet footprint farther in Q1 2012.

By the end of 2011, Sprint plans to extend its Ethernet service to 65 U.S. markets in 2012. Currently, Sprint offers its Ethernet access service in 40 domestic U.S. markets. McGaffigan said they are going to expand the Ethernet service to 37 countries next year.

Of course, Sprint isn't going it alone with Ethernet in its domestic and international markets.

Lacking a local network infrastructure, Sprint is buying last mile access, including fiber, from local carrier partners and establishing External Network to Network Interconnection (E-NNI) agreements to make the connection to their MPLS network.

In addition to leveraging partner fiber networks, Sprint will offer Ethernet over Copper (EoC)-based services, particularly where customers want 2-10 Mbps speeds through service provider partners.   

On the international side, Sprint will have to conduct similar arrangements to build out its Ethernet service in tandem with expanding its network nodes in countries such as Argentina, Russia and Poland.

Right now, Sprint has eight established E-NNI agreements with China Telecom, GTS, Bell Canada (NYSE: BCE), Rogers (NYSE: RCI), NTT (NYSE: NTT), Orange, and Tata (NYSE: TCL) to serve MNCs.

From a service perspective, Sprint's Ethernet portfolio will span a number of traditional Ethernet services, including Ethernet Virtual Private Line Service (EVPLS), Ethernet Private Line (EPL), and Ethernet LAN (ELAN).

Part of the Ethernet service drive will also leverage Sprint's corporate "Network Vision" initiative that's been mainly focused on improving network efficiencies on the wireless network.  

"We are looking to leverage some of the work we're doing around Network Vision and leverage some of those assets for our Ethernet build," McGaffigan said. "I think there's some cost advantages in doing that."

Monnie McGaffigan on leading Sprint's best-kept secret: wireline
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