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Analyst: Sprint Will Be Major Player in 2014

Sprint Corp. (NYSE: S) will become a larger and more efficient player in the U.S. wireless industry by late 2014, once its Network Vision is complete, according to analyst firm Technology Business Research Inc. (TBR) .

This is the message that Sprint has been shouting since it introduced Network Vision last year in order to assure investors that the multibillion-dollar investment in Long Term Evolution (LTE) and multimode base stations is worth the wait. And, after spending time at Sprint's analyst day at its Overland Park headquarters last month, TBR analyst Scott Dennehy believes the strategy will pay off. (See Sprint Accelerates Network Vision.)

"The operator has been attempting to dig itself out of a financial hole for years and will finally begin to see the impact of the Network Vision strategy in 2014 through revenue growth and cost reduction," Dennehy wrote in a research note. "This will drastically improve Sprint’s margins, which were the lowest in the industry in 1Q12."

Sprint's now in phase two of Network Vision, the investment phase, with its first five LTE market launches planned for July 15. Dennehy believes that once the 4G network is widely deployed, it will drive more data usage for Sprint, which, in turn, will bring "tremendous cost-savings and an increase in revenue growth." (See Sprint Sets LTE Launch Date .)

By 2014, Sprint's legacy iDEN network will also be completely shut down, simplifying its network operations. (See Sprint's iDEN Will Be iDONE in June 2013.)

"Sprint will save money by not having to operate another network, by reducing energy consumption of iDEN equipment, and will also save on cell site space," Dennehy says, adding that employee reductions will also cut expenses.

Why this matters
Sprint is counting on its Network Vision initiative to reduce its total costs by $10 to $11 billion by 2017, but it's costing the operator billions of dollars to implement it. It's also costing Sprint time. Verizon Wireless already covers 304 markets with LTE, while AT&T Inc. (NYSE: T) reaches 41 towns and cities. Sprint's planning to reach 250 million PoPs by the end of 2013, up from its five markets this month, but it will still be playing catch-up for many years to come.

For more
— Sarah Reedy, Senior Reporter, Light Reading Mobile

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joset01 12/5/2012 | 5:28:32 PM
re: Analyst: Sprint Will Be Major Player in 2014

A major player in what? Field hockey! Heh.


 


Seriously though the major spend on the network happens for the rest of 2012 and into 2013. So they have to fund that before emerging butterfly-like in 2014. Can they do that?

sarahthomas1011 12/5/2012 | 5:28:31 PM
re: Analyst: Sprint Will Be Major Player in 2014

Cash infusions from their vendors should help. We'll see if they can convince Wall St. to wait around for the long-term picture.

kaop 12/5/2012 | 5:28:29 PM
re: Analyst: Sprint Will Be Major Player in 2014 Major player in Telecom. Fact: Sprint has more cash than AT&T and Verizon; more available 4G spectrum than the At&T and Verizon combined.
joset01 12/5/2012 | 5:28:28 PM
re: Analyst: Sprint Will Be Major Player in 2014

Yeah, but all their spectrum is in different blocks and they need to get existing users off some of it.

sarahthomas1011 12/5/2012 | 5:28:26 PM
re: Analyst: Sprint Will Be Major Player in 2014

It's messy from a marketing perspective too. A Sprint user told me that a sales rep told her the network would be slow for a couple of weeks while it's upgrading...huh? I thought it was business as usual as far as current (non-IDEN) customers are concerned. It'll get even more confusing when choosing their flavor of 4G.

malcolm111 12/5/2012 | 5:28:23 PM
re: Analyst: Sprint Will Be Major Player in 2014

Major player in debt markets, or they wish they could be...


Sprint borrowed significantly to attain that cash position (to the tune of a 6 billion dollar increase in long-term liabilities in the 2 quarters prior to Q12012).  They need that capital invested in site equipment, not in cash, though they might need to carry it in cash to keep their borrowing costs low.  What's worse, that capital cost Sprint much more than its tier 1 competitors, meaning that when its invested, Sprint will need to do better that those competitors in getting a return on that investment in order to break even with their competition who borrowed more cheaply.  That's a tall order for a firm positioned in lower price segment of the industry.


I see the future of Sprint as the threading of a needle more than a dark horse carrier poised for breakout.  The business of competing in the US tier 1 carrier space is expensive and Sprint, while holding some interesting competitive positions in the market, is and will be fighting a lot of tough battles in the next two years:


1) An LTE conversion behind the US carrier market adoption curve


2) A significant purchase commitment to handset manufacturers for the purchase of equipment to be sold at a loss (at least initially)


3) Increased competition in the business wireless space for former IDEN customers due to impending network sunset.


4) An operating cash flow that's 1/10th their tier 1 competitors


Sprint will make it to 2014, but it won't be pretty.  And I'm not convinced that once there, the future will be as bright as this report from TBR says it will be.

joset01 12/5/2012 | 5:28:23 PM
re: Analyst: Sprint Will Be Major Player in 2014

Hi


 


We should have said potential customers or just simply people. i.e 250M people in the US covered by the update.


 


Dan

vishal87 12/5/2012 | 5:28:23 PM
re: Analyst: Sprint Will Be Major Player in 2014

Hi Sarah,


The last paragraph is a bit confusing ... it mentions 250 M POPs. I suppose you meant 250 (two hundred and fifty). And it is 250 PoPs or 250 markets? Or, are they they same thing? (One might expect multiple (points-of-presence) POPs per market, I would guess ...)


Thanks

sarahthomas1011 12/5/2012 | 5:28:23 PM
re: Analyst: Sprint Will Be Major Player in 2014

Yeah, it's confusing because all three report their coverage differently. Verizon's "market" could be a tiny town, which AT&T would call a town but it doesn't. Sprint's breaking out PoPs right now - 250 million, which include potential customers passed.

joset01 12/5/2012 | 5:28:22 PM
re: Analyst: Sprint Will Be Major Player in 2014

Yep, 250M potential customers covered.

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