Sprint's 2.5GHz LTE Spend Will Grow in 2017

Investment in thousands of small cells will drive up Sprint's capex in 2017.

Dan Jones, Mobile Editor

January 31, 2017

3 Min Read
Sprint's 2.5GHz LTE Spend Will Grow in 2017

Sprint's spending on its 4G LTE network in its fiscal third quarter was up quarter-on-quarter at $1.2 billion, with the operator expecting the spend to rise through 2017.

The $1.2 billion capital expenditure (capex) was down compared with the $1.6 billion it spent in the same period last year, but up compared with the $800 million it spent in its fiscal second quarter.

"We do expect capex to increase in the fourth quarter and into fiscal 2017," Sprint Corp. (NYSE: S)'s CFO Tarek Robbiati said on the service provider's earnings call on Tuesday morning.

Sprint currently spends less on its network than any of its three big mobile rivals -- AT&T, Verizon Wireless and T-Mobile US. The CFO says that expenditure in the quarter ended December 31, 2016 mainly went on software updates and adding small cells to its 2.5GHz network.

The software updates were to add carrier aggregation (CA) on its 2.5GHz network. Carrier aggregation bands together radio channels to add capacity and speed to the network. Sprint now has seven devices that are compatible with three-channel carrier aggregation.

It is likely that Sprint's network spending will increase, however, because it is installing more small cells on its 2.5GHz LTE network. CEO Marcelo Claure said in the Q&A session that Sprint now has thousands of small cell approvals and applications underway.

The CEO says that "thousands of new sites [are] being put on air -- that's only going to make our network even better." (See Sprint Lights Fire Under High-Band 4G, Builds for 5G.)

Some software updates will also come in 2017 in the form of High Performance User Equipment (HPUE), which increases performance and coverage on the 2.5GHz network. CTO John Saw says that the technology was made a standard by the 3rd Generation Partnership Project (3GPP) on December 26, 2016.

"We expect to see [compatible] phones this year," Saw said.

CEO Claure, meanwhile, told analysts and reporters on the call that Sprint plans to bring some jobs back to the US. "I'm excited to bring back close to 5,000 jobs from overseas to the US," he said. (See Change Agent Orange? Tech to Talk to Trump.)

This is because -- in part -- Sprint is moving to Web sales for its phones, while also adding more stores, Claure said.

Nonetheless, the CEO is still looking at cutting costs, particularly in the back office and IT. "We're going to enter a second phase of cost-reduction... and this one is a lot tougher," Claure said.

He noted that this is a reason that Sprint has just hired its first-ever COO. (See Sprint Appoints Its First-Ever COO.)

Sprint reported higher revenues for its fiscal third quarter, up at $8.5 billion from $8.2 billion in the same period last year. The operator's net loss narrowed to $479 million ($0.12 per share) from $836 million ($0.21 per share) a year earlier. Even so, analysts at FactSet and Zacks had expected a loss of just $0.08 per share for the quarter.

The bright spot for Sprint was that in the quarter it registered 368,000 phone net adds for subscribers that pay on a monthly basis for their service, and 405,000 postpaid adds in total. "Even with all the aggressive promotional offers from our competitors, we were still able to add more postpaid phone customers than both Verizon and AT&T," Claure said. (See AT&T CEO Hoping for a Trump Bump in 2017 and Verizon Looks Ahead to 5G as 4G Competition Affects Q4.)

That result was "the best in terms of gross ads in four years," Claure noted.

Sprint shares were up 2.2% -- or $0.20 -- at $9.31 on the news of the results at the time of publication.

— Dan Jones, Mobile Editor, Light Reading

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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