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Sprint (s s) is launching an aggressive campaign to roll out a 4G network based on LTE that will cover more than 250 million people and 260 markets by the end of 2013. The third-place carrier told investors at a strategy update meeting that it will move to quickly to reuse its 1900 MHz and 800 MHz spectrum to fuel a fast deployment of LTE, which will build off Sprint’s Network Vision Plan and will utilize new more powerful and efficient multi-mode base stations that can host CDMA, WiMAX and LTE antennas.
But it hasn’t done much to clear up its relationship with its current WiMAX 4G provider Clearwire,(s clwr) which is suffering right now, nor did the company explain what financial impact the iPhone (s aapl) will have in the form of subsidies. Sprint committed to buying a reported $20 billion worth of devices.
LTE launch begins next year
Sprint said it will start launching LTE in mid-2012 with devices riding on its 1900 MHz spectrum, and it will expand eventually to include LTE over the 800 MHz spectrum and later on the 1600 MHz spectrum from LightSquared, which Sprint has agreed to use as part of a spectrum hosting deal, pending FCC approval. Sprint said it will continue to sell WiMAX devices through the end of 2012.
The rollout of 4G will be built off the 1900 MHz spectrum and will be later fueled by the reuse of Nextel’s 800 MHz spectrum, which was tied up on the iDen network. Now, Sprint is planning to migrate Nextel users over to push-to-talk on CDMA with the new recent launch of the Sprint Direct Connect product, which Sprint hopes to have existing Nextel users on by mid-2013.
Where does Clearwire end up?
It’s still an open question what Sprint’s relationship will be with Clearwire, which it currently turns to for WiMAX 4G. Sprint said its WiMAX coverage will peak at 120 million people while LTE will quickly zoom past and outpace WiMAX by the end of next year. Sprint had an early lead with WiMAX through Clearwire, which it owns a majority stake in, but it has been passed up by Verizon (s vz) in terms of 4G coverage, as Verizon rolled out a bigger LTE network. Now, we’ll have to see if Sprint continues to wholesale spectrum from Clearwire or considers buying the company outright.
Sprint said it can rely on its own spectrum holdings through 2014 for an LTE roll out and can look to LightSquared in 2015 if LightSquared can work out its GPS interference issues. But beyond that, Sprint said it will need more spectrum to support users. It declined to say how it will procure more spectrum and what role Clearwire will play.
CEO Dan Hesse said the company’s commitment to sell WiMAX devices through the end of 2012 means Sprint will continue to support WiMAX devices well beyond that. And he said he’s only projecting through 2012, because Sprint just secured a deal with Clearwire through the end of the next year. So it’s too early, he suggested, to forecast beyond that. While commenters pushed to figure out what Sprint was willing to do if Clearwire went bankrupt, Sprint executives declined to comment, saying the company was first looking at improving margins and increasing shareholder value.
“We don’t know that (Clearwire will go bankrupt) but we expect to be involved, and we expect to participate in the process. There has never been a wireless bankruptcy that has led to a service disruption to customers,” Hesse said.
Steve Elfman, president of network operations and wholesale, said the economics right now favor the current relationship with Clearwire, rather than owning the 4G provider. The sense is that Sprint will be clearly involved in any bankruptcy proceeding, and it’s confident it won’t leave its current WiMAX users affected. But it can also lead to speculation that it’d be happy to pick up the Clearwire assets for a song through bankruptcy. The two companies continue to talk, but Clearwire isn’t beholden to Sprint, which has caused issues for the carrier. Letting Clearwire go bankrupt could allow Sprint to grab control of the WiMAX network, but it also opens the possibility a rival could try to buy up the Clearwire assets as well.
Sprint looks to an LTE future
But it’s clear that Sprint sees its future with LTE. It not only provides faster speeds but also provides better cost structures for Sprint, which can tap a wider market for LTE devices and infrastructure. The Network Vision upgrade, which is already underway and will be built out with hardware from Samsung, Alcatel-Lucent (s alu) and Ericsson(s eric), will also allow Sprint to reduce the number of cell sites it runs from more than 60,000 to about 40,000, which will also brings savings through consolidation, lower power costs and maintenance needs. Altogether, the project is expected to bring more than $10 billion in savings between now and 2017.
Sprint said it will launch 15 LTE devices next year, including tablets, smartphones and modems. It will have LTE/CDMA dual-mode phones as part of that line-up, but Sprint had no specific devices to show off. HTC and Motorola (s mmi) pledged to support Sprint’s rollout for LTE.
Sprint enters the iPhone market, but how expensive is that?
This is a pivotal time for Sprint, which now has the iPhone 4S and iPhone 4 on it network. The company has been turning things around with better churn and customer satisfaction, but it faces two giants in Verizon (s vz) and AT&T (s t), which is still in the hunt to add T-Mobile. The company has a chance to get back in the game with the iPhone, which Sprint CEO Dan Hesse was the No. 1 reason for consumer churn. But company executives sidestepped questions about how much it was paying for the iPhone in subsidies and said it will have enough liquidity, about $5 billion, right through March of next year before it needs to look for additional funding. That’s another question that gnawed at investors and analysts in the room.
Joe Euteneuer, Sprint’s CFO, said the iPhone will improve churn and expand its user base. And he assured attendees that Sprint had flexibility in how it raises funds to keep the network improvements going next year. Still, by not addressing the question head on, it raises concern that even with the improved efficiencies and better performance of the upgraded network, the iPhone payments could push the company to the edge if sales and additional revenue per user doesn’t meet expectations.
Though Sprint did a lot to explain its road map for the coming years, there are still enough questions there that make you wonder how bumpy this ride will be. Stay tuned.