The third-largest wireless carrier in the U.S.,
Sprint Nextel Corp.
(
S
), plans to launch its high-speed 4G LTE services on July 15.
Initially, the services will be deployed in five markets - Atlanta,
Dallas, Houston, Kansas City and San Antonio.
This move will boost Sprint's competitive position related to
LTE deployments. Currently, the company is about a year and a half
way behind the wireless giant
Verzion Communications Inc.
(
VZ
) and 10 months behind the second wireless carrier
AT&T Inc.
(
T
) in deploying LTE networks.
Sprint expects to complete the nationwide deployment by the end
of 2013. The LTE coverage is expected to extend to more than 250
million customers with 22,000 cell sites by 2013.
The 4G LTE evolution signals a shift from the company's current
WiMax network, a wireless broadband technology offered in
collaboration with
Clearwire Corporation
(
CLWR
). The development is a part of Sprint's network upgrade plan,
Network Vision, which aims to combine various 3G and 4G
technologies into one seamless network.
As part of the Network Vision plan, the company is concentrating
on the core Sprint platform, which includes CDMA, WiMAX, LTE and
other network technologies. The company started terminating the
Nextel platform, which refers to the iDEN business. Sprint intends
to decommission 30,000 cell sites to 38,000 from the existing
68,000, of which 9,600 cell sites will be shut down by the end of
the third quarter and the remaining in the next year.
The Network Vision plan would lead to the efficient use of
capital, reduction of cell sites, the elimination of dual networks,
backhaul efficiencies, reduced churn, lower roaming charges and
energy cost savings. Hence, the network restructuring is expected
to generate $10 billion to $11 billion in savings over seven years
(2011-2017). The company expects the Network Vision deployment to
be over by the end of 2013.
No doubt, this investment will dilute Sprint's free cash flow
for the next two years. However, liquidity is expected to improve
once LTE is fully deployed.
Moreover, the company will have to pay for subsidizing the
Apple Inc.
's (
AAPL
) iPhone. Sprint has promised to buy about 30.5 million iPhones
from Apple over the next four years and pay $500 to subsidize the
product. The iPhone will nevertheless help Sprint to gain new
customers while retaining the old ones. This will lead to increased
subscriber growth, reduced churn and higher average revenue per
user.
We are maintaining our long-term Neutral recommendation on
Sprint. For the short term (1-3 months), the stock retains a Zacks
#2 (Buy) Rank.
APPLE INC (AAPL): Free Stock Analysis Report
CLEARWIRE CORP (CLWR): Free Stock Analysis
Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research