Sprint to include Clearwire spectrum in new LTE roll-outs + Analysts turns cautious on Sprint

Sprint will incorporate spectrum from Clearwire’s network in its Long-Term Evolution service across the country next year, the carrier disclosed Tuesday, adding that it expects all of its new smartphones to support 4G speeds.  Sprint executives declined to say whether those models will include the iPhone.

While Clearwire’s frequencies occupy a different band than Sprint’s other spectrum, the 2.5 GHz LTE base stations are designed to add capacity and boost service in dense, urban areas.

With the Clearwire acquisition, Sprint got access to an emerging Clearwire LTE network that it plans to use for extra mobile data capacity in densely populated areas. Though it uses a slightly different form of LTE than Sprint’s and operates in a relatively short-range spectrum band, around 2.5GHz, the former Clearwire network could give the carrier a large amount of capacity to bolster services in cities.

The network had been intended for Sprint’s use through the longstanding partnership between the two companies, but Sprint’s takeover of Clearwire gave that plan a more solid foundation.

There were already about 2,000 Clearwire LTE sites completed when the buyout was completed earlier this month, said Steve Elfman, president of network operations and wholesale, on the conference call. He expects several thousand 2.5GHz LTE base stations on the air this year, with sites across the country next year, though not the full deployment of sites that will use the spectrum. The 2.5GHz radios don’t have as long a range as Sprint’s other gear, so they’ll be deployed in a larger number of sites, he said.

Sprint plans eventually to operate LTE in three spectrum bands: Its own 1.9GHz band, the 800MHz frequencies from its defunct Nextel network, and the 2.5GHz spectrum. Earlier this month it introduced the first mobile device that will be able to use all those bands.


Analyst Opinion on Sprint: Waiting for Network Differentiation amid Heightened Competition, by David Dixon, FBR Capital Markets

Sprint reported mixed 2Q13 results, with better-than-expected revenue, offset by weaker-than-expected postpaid net adds and churn.  Consolidated revenues of $8.9B and wireless revenue of $8.1B were ahead of consensus.

Operating Income Before Depreciation And Amortization (OIBDA) of $1.42B was slightly above the Street; postpaid net losses of 1,045,000 fell short of the consensus estimate  of 914,000 net losses. Postpaid churn of 2.63% was up 83 bps annually and above the Street.

Sprint will continue to face customer churn pressures as it rolls out Network Vision. We believe Sprint is facing increasing
competitive pressure in the postpaid market, with Verizon and AT&T  encroaching from the high end and a resurgent T-Mobile US encroaching from below.
We expect T-Mobile to pressure both AT&T and Sprint in the prepaid and postpaid markets as the company completes its 4G network   upgrade (which shows better performance, versus T and VZ, according to   our vendor checks), launches its LTE network, and markets its new “no contract” plans with a reinvigorated device lineup.
We believe Sprint  will also face higher-than-expected cost pressures; this drives our below-consensus OIBTDA forecasts ahead of competitive differentiation in FY15.

    * LTE buildout progressing well, but still behind rivals. Sprint announced the launch of LTE in an additional 41 markets, bringing the total number of markets to 151. The company remains well behind both Verizon and AT&T, with T-Mobile quickly catching up to Sprint. T-Mobile also announced that it would offer LTE on wider channels in 90% of the top 25 markets by the end of 2013, versus the current 2×5 MHz deployment that both Sprint and T-Mobile are currently using.

    * Competitive intensity beginning to heat up. Both Sprint and T-Mobile have closed deals that provided capital and spectrum, creating a path forward for the two smaller players to better compete. However, we expect that Sprint may take until mid 2014 to approach competitive parity (especially for voice), and FY15 to differentiate on data; but T-Mobile should see churn improvement in FY13, which will affect Sprint, AT&T, and Verizon, in that order. Competitive intensity will affect both margins and capex costs as the four major operators compete on price and network quality.

    * Hard-line, versus pragmatic, DOJ stance remains cause for concern. The DOJ’s hard-line stance regarding the need for four nationwide wireless players suggests less potential for a Sprint/T-Mobile US merger. The DOJ appears excited by the fact that wireless network operators have no choice but to invest, even if incremental returns are poor.

    * We are downgrading Sprint to Market Perform from Outperform. Our downgrade is based on expectations for a weak network position to persist amid increased competition from T-Mobile (in prepaid) and Verizon and AT&T (in postpaid). Our OIBDA forecasts are significantly below consensus.

Other Analyst Ratings:

Analysts at Deutsche Bank  reiterated a “buy” rating on shares of Sprint Nextel Corp. in a research note to investors on Monday. Analysts at BMO Capital Markets cut their price target on shares of Sprint Nextel Corp. from $9.00 to $7.00 in a research note to investors on Monday, but they still have an “outperform” rating on the stock.

Two research analysts have a sell rating on Sprint, twenty-one have given a hold rating, eight have given a buy rating and one  has assigned  a strong buy rating to the stock. The company presently has an average rating of “Hold” and an average price target of $7.13.


Disclaimer: The author of this blog post does not hold stock in Sprint or any other telecom company!  We do not recommend buying individual stocks of any company.