Sprint to increase CAPEX to focus on mobile 5G deployment in 1H-2019

Sprint will increase its network capital expenditure by at least $1 billion for the coming year as promised on Friday morning’s earnings call.  The #4 U.S. wireless carrier plans to deliver mobile 5G in the first half of 2019.

–>That’s 1 year before the IMT 2020 standards will be completed!

Sprint Corp talked about its mobile 5G plans: “We’re working with Qualcomm [and others] in order to deliver the first truly mobile 5G network in the US in the first half of 2019,” CEO Marcello Claure said on the call.

Mr Claure said that Sprint will be able to deploy mobile 5G nationwide on 2.5GHz band in 100MHz channels. “We have the spectrum to lead on 5G, and basically lead in a different way,” he noted.  Claure said later in the question and answer session that Sprint had a commitment from a “leading Korean” device vendor that it will have a 5G device ready within its 2019 timeframe.

This implies an increase in capital expenditure spending for Sprint’s network for fiscal 2018, new CFO Michel Combes said. Sprint’s total capex spending for fiscal 2017 will be in the $3.5-$4 range. Capex will hit $5-$6 billion in fiscal 2018, which starts in April 2018.

Sprint will spend to increase the number macro cell sites by 20%, and support its 2.5GHz, 1900MHz, and 850MHz bands on nearly all of its existing macro sites. Currently, around half of its macro sites have tri-band support.

The CEO added that Sprint plans to deploy more than 40,000 outdoor small cells, and “more than 1 million Magic Boxes,” the wireless small cells that it uses to improve in-home coverage.

In the field, Sprint expects to update sites with multiple-antenna array hardware, or “Massive MIMO” in 2018. “Massive MIMO will serve as Sprint’s bridge to 5G,” Claure said. (See Sprint Says No to mmWave, Yes to Mobile 5G.)

This is because the MIMO hardware can be updated to 5G NR standard over-the-air, the CEO said.

Our strategy is predicated on creating on amazing customer-experience, offering customers the best products and services, while delivering superior financial results. First, we recognize that to be a truly great company we have to have a great product, which for us is our network. While our network is much improved, we believe our next-gen network will truly differentiate Sprint over the next couple of years, due to our strong spectrum assets that enables Sprint to be the leader in the true mobile 5G.

This is the biggest network capital program in many years. And I will share more details of our network strategy in a few moments. I cannot wait to, once and for all, be able to sell the product that is best in the industry with competitive coverage, the fastest speed and the highest capacity.

Second, we will continue to deliver the most compelling value proposition to our customers across all of our segments. We will continue to play from a position of strength by leveraging our spectrum holdings and continue to lead with the best-only net offering in the market. Data usage strength are projected to grow exponentially, especially with 5G.

By having the most spectrum, combined with new technology that massively increases our capacity, we’re certain that we’ll be best position for to support unlimited data in the future.

Third, we will continue to drive a smart distribution strategy, with over 1,000 new stores open year-to-date across our Sprint and Boost brand, and several hundred several hundred throughout next year. We have designed a dynamic distribution model that allows to continuously optimize the right balance of physical and distribution – and digital distribution.

Sprint will also leverage its partnerships with Altice and Cox Communications Inc. to expand its backhaul capabilities for LTE-Advanced and 5G. Sprint CTO John Saw chimed in briefly on the call to say that some of the capex spend could be on “dark fiber” for backhaul needs.

Against this backdrop, Claure said there would be continuing job cuts at Sprint, including at the executive level, aiming for “a leaner and more agile company across our non-customer-facing workforce.” Sprint has cut thousands of jobs during the past couple of years.

True to his reputation as a “turnaround specialist,” new CFO Michel Combes said he is looking at more ways to “decrease cost structures” at Sprint. He promised to reveal more details in the March quarter. (See Sprint Appoints Ex-AlcaLu Boss Combes as CFO.)

For the quarter, Sprint reported revenue of $8.24 billion, down from $8.55 billion a year ago. Net income for the quarter was $7.16 billion (or $1.76 per share) thanks almost entirely to tax reform gains of about $7.1 billion, compared with a net loss of $479 million a year ago.

References:

https://seekingalpha.com/article/4142755-sprints-s-ceo-marcelo-claure-q3-2017-results-earnings-call-transcript

http://www.lightreading.com/mobile/5g/sprint-promises-mobile-5g-in-h1-2019-signals-more-job-cuts/d/d-id/740273?

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