Understanding Sprint’s Strategy

Today’s Sprint strategy meeting revealed a significant amount of information about the future of the Now Network. Sprint has began the rollout of its new network and the rapid deployment of LTE on their 800 and 1900MHz frequencies. In fact, the “Network Vision” deployment is going so well that Sprint is expecting to be completely finished by the of end of 2013, rather than the speculated 3 to 5 years.

Sprint is investing $4 to $5 billion into “Network Vision,” with an expected net return of $10 to $11 billion by 2017. Sprint is expecting to launch it’s first LTE device by mid-2012 (posibly an LTE EVO device) and close the year with 15 LTE devices in it’s lineup. The agreement between Clearwire and Sprint is set expire at the end of 2012. Sprint will sell WiMax devices all the way through til the end of 2012, but support for WiMax devices will continue for an unspecified period beyond 2012.

Sprint is progressively turning over the Nextel’s iDEN 800MHz spectrum for use on Sprint’s CDMA. The 800 and 1900MHz spectra are owned and operated by Sprint, and will provide for voice, data, and soon 4G-LTE as per “Network Vision.” Pending FCC approval due to GPS interference, LightSquared’s 1600MHz spectrum will also be used exclusively for LTE on Sprint, in addition to the 800 and 1900MHz frequencies. There are no plans to use Clearwire or their 2.5GHz spectrum after 2012. However, Sprint is waiting to see what happens with their network change to LTE.

Many of you have numerous questions such as: “Why is LightSquared paying Sprint to use their LTE network?”, “Where is Sprint getting the money to invest in “Network Vision?”, “What is going to happen to my WiMax device?”, or “How does this affect me?” Keep reading for answers to all these questions.

If you will recall back in December, Sprint had just announced it’s network plans for the future. Their entire “Network Vision” project was going to be completed by Sprint, without aid from other investors. Their main network partner, Clearwire, was broke and not getting better. Well, Sprint needed money and an opportunity showed, which now appears to be Sprint’s savior.

LightSquared, a whole-sale 3G wireless network company, needed to update its network to include 4G-LTE as per federal mandate. With a cost factor of $13 billion for a stand-alone expansion of their 4G network, they were desperate for a partner to help them rollout their own whole-sale 4G-LTE nationwide network. Coincidently, Sprint needed an estimated $4 to $5 billion for “Network Vision” to be completed. LightSquared then proposed a deal, which Sprint could not pass up.

In July, Sprint announced a hosting agreement with LightSquared that was set to save both companies billions of dollars. “Under the terms of the agreement, during an 11 year period, LightSquared will make payments to Sprint of approximately $9 billion in cash for spectrum hosting and network services as well as LTE and satellite purchase credits which are currently estimated to be valued at approximately $4.5 billion.” This is $4 billion less that LightSquared would have to pay to achieve their goal of a nationwide 4G-LTE network, and Sprint gaines an additional $4 billion to accomplish something they were already planning on doing. LightSquared will simply be hosting the 1600MHz LTE network, while Sprint customers reap the joys of using a faster LTE network because of network offload.

This is an economically symbiotic relationship for both companies. Even the customers are benefitting from this agreement. So why is Sprint still taking a hit in the stock market? Misunderstanding the situation is a major contributor. Analysts believe that Sprint should have invested $600 million into Clearwire to help upgrade them to rollout their 4G-LTE, but that doesn’t help Sprint’s situation. Not only have they lost the $9 billion from LightSquared, but that adds an additional $600 million on top of the $4 to $5 billion that the “Network Vision” project will already cost. It is unclear where the the analysts are seeing how this would fix anything.

Nonetheless, overall this is a major improvement for Sprint as a whole. Voice, 3G data, and 4G-LTE capabilities being used simultaneously on 800 and 1900MHz, along with a 1600MHz dedicated to 4G-LTE usage, allows for a great user experience on Sprint. Sprint is finally utilizing all of their resources to the upmost efficiency. This is not a time to bail out on Sprint, but instead Sprint seems to still be making all the right moves going forward.