Sprint Corporation (S)

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Sprint Corporation (S)

UBS 41st Annual Global Media and Communications Conference Call

December 10, 2013 2:30 pm ET

Executives

Dan Hesse - Chief Executive Officer

Analysts

John Hodulik - UBS Securities

Presentation

John Hodulik - UBS Securities

Thank you all for joining us. I'm John Hodulik, the cable, telecom and satellite analyst here at UBS, and I'm very pleased to announce that our next speaker is Dan Hesse, CEO of Sprint. Dan, thanks for being here.

Dan Hesse

Thank you, John, good to be here, although I kind of feel like it's a bag of executives sitting up here in a long line of chairs and microphones.

John Hodulik - UBS Securities

Hopefully it won't be quite [indiscernible]. So the format is, obviously we have about 45 minutes. Dan and I are going to run through some Q&A and then we'll have some time for questions from the audience. So Dan, 2013 has been a big year for Sprint given the closure of both SoftBank investment and the Clearwire transaction. Can you set the stage for us in terms of how you believe Sprint is positioned and what can we expect from the Company as we look out into 2014?

Dan Hesse

Thanks, John, and thanks for your interest in Sprint and being here, and obviously 2013 has been a very eventful year with a couple of pretty sizable important transactions, like Clearwire and SoftBank. In terms of 2013 and where we are right now, is really 2013 has been a year of building Network Vision and of course Spark which we announced on the 30th of October. In essence, what we are going through now with this massive build is some short-term pain for some long-term gain, and even though last quarter we have got some positive elements like growth in EBITDA in spite of dilution from Clearwire and the other if you will investments with record ARPU, but of course elevated churn associated with not only can we shut the iDEN network down on July 1, and if you will the Sprint brand or the CDMA customers, even though we were successful in recapturing 40% of those customers which was about three times higher than we'd expect given our overall market share, we still lost 60% of those business accounts or the CDMA or Sprint brand, parts of those accounts if you will come off in Q3 and Q4 that we have described.

And then as we are building out Network Vision, a lot of people don't realize it is, it is something that really hasn't been attempted on this scale before, it's a complete rip and replace of the entire network, all the 3G equipment coming out, every base station, all the backhaul, every switch, and in almost all cases the vendors changed as well. So it's a complete 3G rip-out and new 4G network. So as a result of that of course, there are what we call dust issues in a lot of our markets. So we have seen elevated churn as a result, and personally it's something that's painful to me because we have worked so hard on the customer experience and customer service where the American Customer Satisfaction Index recognized us this year as the most improved U.S. company across all 47 industries they study in customer satisfaction over the last five years. Then we have gone basically from last to first in our industry. And of course the short-term network issues are impactful from a churn perspective but we believe that what we are building, and that's why we picked the name like Spark, we didn't want to call it 4G LTE Turbo or what have you, we wanted to pick a different name and we can chat about that, it's something that is worth waiting for, for our customers.

John Hodulik - UBS Securities

So let's dig into the Spark network strategy a bit and really focus on the spectrum that you have that supports that. So a big part of the Spark side uses the tri-band, [indiscernible] and getting tri-band devices. Can you update us on where you are in terms of rolling out the 2.5 GHz spectrum?

Dan Hesse

I think it's important about Spark because clearly what makes it possible kind of the foundation of Spark is this big slot of spectrum, this 2.5 spectrum that we bought from Clearwire, and it's a unique set of spectrum assets where we have if you will in the vast majority of the country 120 or more megahertz of contiguous spectrum, and that's generally what people focus on. But the reason that October 30th – and by the way, in terms of what we showed off in our Burlingame labs and if you contact Brad Hampton here for those of you who actually want to see the demonstrations, it's still up there and working if you want to see what Spark does. It's really to explain all of the other leading-edge technologies that we are putting into this new network. So it's a lot more than just the 2.5.

So one is 8T8R, which is 8 transmit 8 receive, and actually 2.5 makes that possible because of the in essence very high frequency. We can put basically 8 transmit 8 receive on the base station, so basically the base station radios. We can get much better link budgets for much better coverage than you traditionally think about from 2.5 or very high frequency, so much closer in performance to like 1.9, and we are the first carrier in North America to roll that out.

Read the rest of this transcript for free on seekingalpha.com