) invested in Clearwire (
) 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 (
), Verizon (
) 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.
currently have a price estimate of $4.35 for
, 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
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
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 , which might motivate Sprint to deploy LTE in the
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
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.