The past week saw quite a few developments in the telecom
sector. The week started off with Sprint's (
S
) stock falling 6% Monday on fears that it may be mismanaging
its Network Vision project and incurring higher capital expenses
than previously anticipated. Sprint then announced that its LTE
network will be launched on July 15th, giving its stock some much
needed respite. Verizon (
VZ
) moved closer to getting FCC approval for its proposed spectrum
purchase from the cable companies by announcing a spectrum swap
deal with T-Mobile, one of the foremost opponents of the
Verizon-cable deal. The largest wireless carrier also became the
first in the industry to launch multi-device data share plans this
week.
Sprint
Sprint's shares fell 6% Monday on fears that it may be
mismanaging its Network Vision project and incurring higher capital
expenses than previously anticipated. According to Bloomberg,
citing a Detwiler Fenton & Co. report, Sprint reclaimed
about 250 employees that were previously assigned to Ericsson, its
principal network equipment vendor. The critical report called
the reassignment of employees a 'black eye' for Ericsson
and saw it as a sign of trouble for a heavily debt-laden
Sprint that is aggressively trying to execute its
multi-billion dollar Network Vision strategy.
While the market's nervousness is understandable considering the
high sensitivity of Sprint's stock to an increase in capital
expenditure and its highly leveraged balance sheet, we believe the
shift in employees must be seen in the context of the changes that
Sprint's network is seeing now as against 2009 when it had signed
on Ericsson to manage its network. In
Sprint Is Worth $3.75 But Expansion Costs Worry
Investors
, we discussed how the shift of employees was warranted and is not
necessarily a mismanagement of resources.
Almost as if in cue to assuage fears that it may be botching its
Network Vision Plans, Sprint announced that its LTE network
will go live in five cities on July 15th. The five cities in
question are Atlanta, Dallas, Houston, San Antonio
and Kansas City. With Baltimore soon to follow, the company
will make good on its promise of launching LTE in six cities by the
mid-year. (see
Sprint Sets July 15 LTE Launch Date
)
Verizon
Verizon took a big step forward in getting its spectrum purchase
deals with the cable companies approved through an AWS spectrum
swap deal with T-Mobile announced on Monday. T-Mobile, along with
Sprint, has been a vocal critic of the Verizon-cable deals and
Monday's announcement should alleviate concerns that the
country's largest wireless carrier is trying to hoard spectrum.
The FCC is also likely to take a more favorable view of the
cable spectrum purchase in the aftermath of this deal. (
Verizon Swaps Spectrum With T-Mobile; Moves Closer
To Getting FCC Approval
) Verizon had announced the controversial $3.6 billion deal
with SpectrumCo, a joint venture formed
by Comcast, Time Warner and Bright House Networks,
to buy all its AWS spectrum late last year in December. Soon after,
it signed a similar deal with Cox Networks to add to the spectrum
pile it is building to bolster its LTE plans.
Verizon also introduced the much talked about Share Everything
plans on June 28th. Once these multi-device data share plans take
effect, Verizon will scrap the older family as well as individual
tiered plans for new Verizon customers. While the existing Verizon
subscribers with tiered data plans won't be forced to change their
plans when they upgrade, the ones with the unlimited data plans
will have to switch to one of the tiered plans unless they
purchase an unsubsidized phone.
Unlimited plans have become highly unprofitable for Verizon
and AT&T, both of which stopped offering the plans last
year as the demands on their networks increased due to growing
smartphone usage. As 4G LTE becomes the new standard and
spectrum gets scarcer, Verizon will be looking to gradually
kill these plans completely and monetize every last byte of data
that is transferred on its network. (see Verizon's Share
Everything Plans Could Kill The Last Unlimited Plans) It will also
look to drive the adoption of other data-only connected devices
such as tablets, telematics and M2M devices as we expect most of
the future growth to come from these devices.
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