Could Sprint's 4G Ambitions Include LTE?

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Sprint ( S ) invested in Clearwire ( CLWR ) over two years ago to build out its WiMax 4G network that the company believed would help it turn around its postpaid business. More recently, it expressed interest in LTE and ran some tests leading some to believe that Sprint would begin a massive LTE rollout. While the company has sent mixed signals on its intentions with LTE, some industry observers suggest that deploying LTE in conjunction with WiMax could make sense for Sprint.

Sprint primarily competes with AT&T ( T ), Verizon ( VZ ) and T-Mobile in the wireless business and all providers are looking to upgrade their networks to next generation technology like LTE and WiMax that can handle much heavier data usage and deliver faster download speeds.

We currently have a price estimate of $4.35 for Sprint , which is about 10% ahead of the market price, and we believe that a successful 4G rollout could help it regain market share in the wireless business.

Sprint's Early Move With WiMax

The company is the majority stakeholder in Clearwire and resells its service as Sprint 4G. Sprint's WiMax coverage is expected to reach about 80 markets covering 120 million POPs by the end of 2010. Verizon plans to roll out its LTE network and cover 25-30 commercial markets by year end. AT&T is further behind and is expected to launch its own LTE network commercially in mid-2011.

Sprint's early entry two years ago gives the company an advantage in terms of testing 4G service, getting customer feedback, working on improving the network and removing bugs. However, can Sprint really build upon this advantage?

To do so, Sprint would need to create an ecosystem that will help it convey the value of its 4G WiMax to the customers including blockbuster mobile devices and related applications that attract and retain subscribers. On this front, Sprint has had some success with the HTC EVO and partnered with Wired, Reddit and Ars Technica to spur 4G app development .

However, global support for LTE might mitigate Sprint's early market entry advantage.

Can LTE Pave the Way For a Merger?

Sprint's management has acknowledged in the past that LTE deployment in conjunction with the WiMax push is still an option. LTE deployment could be fruitful to Sprint in terms of bringing the company on similar platform as its bigger rivals. From Sprint and Verizon reports, LTE speeds are higher than WiMax [1], which might motivate Sprint to deploy LTE in the future.

Sprint also acknowledged months ago the possibility of a merger with T-Mobile. If Sprint and T-Mobile rolled out compatible 4G networks, they might be better equipped to compete with AT&T and Verizon and take market share. This tie up was not possible earlier because of the different 3G technologies of the two carriers.

While we don't see this happening anytime soon, the 4G rollout over the year and beyond could reshape the mobile phone market.

You can see the complete $ 4.35 Trefis price estimate for Sprint's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CLWR , S , T , VZ

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