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Sprint to Skip the Upcoming Low-Band Spectrum Auction

Leading wireless carrier Sprint Corp.S has decided not to take part in the upcoming auction of 600 MHz low-band spectrums to be conducted by the U.S. telecom regulator Federal Communications Commission (FCC) in early 2016.

The 600 MHz airwaves auction is popularly known as "Incentive Auction" in which the FCC will acquire valuable airwaves from TV broadcasters and then resell these to wireless carriers or other firms who also require spectrums. Notably, Sprint refrained from taking part in the AWS-3 auction which ended in Jan 2015 nor did it participate in its earlier version which was conducted in 2008.

Sprint said that the company has adequate spectrums to support its current and future customers with sufficient network coverage. Instead of spending a significant amount of money to acquire more spectrums, Sprint will rather invest to upgrade its existing network and improve its market position. Management is about to start a complete overhaul of its infrastructure to provide faster speed.

We believe that by skipping the Incentive Auction, Sprint can save a great deal of money but will lack significantly in terms of network quality with respect to other established players. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities.

The 600 MHz broadcast TV spectrums will be utilized by wireless operators to expand and strengthen their 4G LTE (Long-Term Evolution) networks. At present, Sprint is lagging way behind its larger peers like Verizon Communications Inc. VZ and AT&T Inc. T .

Small-sized wireless operators such as Sprint, T-Mobile US Inc. TMUS and C Spire Wireless had tried to put pressure on the FCC to increase the size of the reserve from 30 MHz to 40 MHz or at least half of the spectrum available in a given market. However, the FCC refused to give in to the demand for granting more spectrums as reserve in the upcoming auction.

We believe that one of the reasons for Sprint to take this decision is its weak financial condition. The company is witnessing annual losses since 2007. It burned a massive $2.2 billion in cash in the last reported quarter which ended on Jun 30, 2015. Recently, Sprint's majority owner Softbank Group of Japan set up two off-balance sheet financing vehicles to finance phone and network equipment.

Sprint is now caught up in the ongoing cut-throat pricing competition in the U.S. telecom industry which is inevitably taking a toll on its financial health. Just a couple of weeks ago, credit rating agency Moody's Investor Service downgraded the company's credit rating to B3 from B1, or six levels below investment-grade citing excessive pressure from intensifying competition. Sprint currently carries a Zacks Rank #2 (Buy).

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AT&T INC (T): Free Stock Analysis Report

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T-MOBILE US INC (TMUS): Free Stock Analysis Report

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


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

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