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Sprint Clarifies LTE Plans, but Still Leaves Too Many Questions Unanswered
| Oct 11, 2011 | Consumer Services U.S.
| Analyst: Wes Henderek
Event Summary
October 7, 2011 - Sprint has finally announced that it has chosen to deploy LTE as part of its Network Vision plans and will launch its LTE network starting in the middle of 2012. The carrier expects to have 123 million LTE POPs covered by the end of 2012 and 250 million POPs covered by the end of 2013. The carrier will also begin to transition iDEN users off of the 800 MHz iDEN network so that it can free up the 800 MHz spectrum.
Quick Take
Analytical Summary
• Current Perspective: Negative on Sprint’s announcement that it will launch an LTE network by the middle of 2012 and completing its Network Vision plans early. Despite making the right decision by announcing an LTE network, following its Network Vision framework, and pushing to move quickly away from iDEN, this announcement raises some tough questions and could put Sprint into some risky short term binds. Without knowing the status of LightSquared, and without revealing anything with regards to Clearwire, Sprint is placing a heavy bet on its 1900 MHz spectrum, which will be tasked in the near term with handling iDEN, LTE and CDMA iPhone subscribers with unlimited data plans.
• Vendor Importance: Very high to Sprint, as the carrier hit a point where it very badly needed to make its intentions known with regards to LTE, since both of its major national competitors – Verizon Wireless and AT&T – already have live LTE networks. Sprint also needed to try and find a way to deploy LTE quickly while waiting to find out what will happen with LightSquared and considering what to do about Clearwire. Without LTE plans Sprint would have been put in a much bigger competitive disadvantage by the middle of next year (especially if Apple launches an LTE iPhone 5 sooner rather than later).
• Market Impact: High on the wireless services market, as Sprint will have the opportunity to be more competitive with market leaders such as AT&T and Verizon Wireless with an LTE solution in the near term from a marketing perspective, but may struggle to provide solid network performance at 1900 MHz without additional spectrum solutions from the likes of LightSquared and Clearwire. In addition, Sprint may face a crunch for cash as it needs to raise money in the capital markets for its network buildout.
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Sprint Accelerates Deployment of Network Vision and Announces National Rollout of 4G LTE
LTE deployment expected to reach 250 million people by 2013
OVERLAND PARK, Kan. (BUSINESS WIRE), October 07, 2011 - At its 4G Strategy/Network Vision Update event today in New York, Sprint Nextel (NYSE: S) updated the financial community on its plans to accelerate deployment of Network Vision and its plans to roll out 4G LTE on its licensed spectrum. Network Vision, originally announced in December 2010, is Sprint’s plan to consolidate multiple network technologies into one seamless network with the goal of increasing efficiency and enhancing network coverage, call quality and data speeds for customers across the United States.
Dan Hesse, Sprint CEO, said, “Our progress deploying Network Vision enables Sprint to extend and evolve our 4G leadership and to improve the experience for 3G customers. Our next-generation network and cutting-edge device lineup, combined with the industry’s best pricing plans, give Sprint customers the best experience in wireless.”
The company's presentation today, which featured Hesse; Steve Elfman, president-Network Operations and Wholesale; Bob Azzi, senior vice president-Network; Fared Adib, vice president-Product Development; and Joseph Euteneuer, chief financial officer, highlighted the following:
• Sprint making significant progress on Network Vision deployment. Sprint reviewed progress to date in deploying Network Vision, including the rollout and successful testing and trialing of multimode technology, the launch of Sprint® Direct Connect® on the CDMA network and the new devices launching in the fourth quarter. As a result of the success and the progress made so far, the company is now targeting completion of Network Vision deployment by the end of 2013 – two years sooner than originally scheduled.
• Sprint will begin a rapid national rollout of LTE on its 1900MHz spectrum. Sprint plans to launch 4G LTE on its 1900MHz spectrum by midyear 2012 and complete the network build-out by the end of 2013. By the conclusion of 2013, Sprint’s 4G coverage footprint is expected to cover more than 250 million people. Sprint expects to launch CDMA-LTE devices by mid-2012, with approximately 15 devices coming throughout the year – including handsets, tablets and data cards. Additionally, CDMA-WiMAX 4G devices, like the award-winning HTC EVOTM 4G, Samsung EpicTM 4G Touch and Nexus STM 4G, will continue to be sold throughout 2012.
• Sprint introduces spectrum-hosting business. Management described Sprint’s unique ability to host third-party spectrum and how it’s made possible through the Network Vision multimode base stations. The spectrum-hosting opportunity capitalizes on Sprint’s Network Vision platform and uses its flexible, open technology architecture. Spectrum hosting is a new revenue opportunity for Sprint and a cost-effective way to gain additional network capacity to better serve Sprint customers.
• Network Vision provides significant economic benefit to Sprint. Sprint reaffirmed the economic benefits associated with Network Vision. As declared last December, Network Vision is expected to cost an incremental $4 billion to $5 billion and deliver $10 billion to $11 billion in net economic value to the company between 2011 and 2017. Operating Income Before Depreciation and Amortization (OIBDA) margin is expected to improve 400 to 600 basis points or about 4 percent to 6 percent from current levels by 2014. The primary components of value come from a broader footprint (reduced roaming costs), cell-site reduction, the elimination of dual networks, backhaul efficiencies, reduced churn, more efficient use of capital and energy cost savings. In parallel to the Network Vision initiative, Sprint also stated that it is pursuing improvements in its core operations that could result in an additional 400 to 600 basis points or about 4 percent to 6 percent of OIBDA margin improvement by 2014.
Euteneuer said, “Network Vision creates a platform for growth and competitive advantage and delivers significant profitability upside potential. Over the long term, continued execution on Network Vision as well as other improvements to our core operations are expected to result in overall margin expansion, improved return on invested capital, and, ultimately, increased value for our shareholders.”
