Sprint Nextel (S), the third-largest U.S. wireless carrier, intends to complete the deployment of long-term evolution (LTE) technology based fourth generation (4G) network in its entire coverage by year-end 2013.
Sprint is a trailblazer in 4G having leapfrogged over its larger U.S. peers, VerizonCommunication (VZ)and AT&T Inc. (T) by becoming the first carrier to deploy commercial 4G service in Baltimore, back in October 2008. The company’s 4G services cover 71 markets in the U.S. and reached 120 million people at year-end 2010.
The company currently runs its third generation (3G) network in the 1900 MHz band, has a wholesale deal with Clearwire Corp. (CLWR) to use WiMAX in the 2.5 GHz band and owns an iDEN network in the 800 MHz band.
The deployment of 4G LTE network is a part of its network modernization project “Network Vision”, initiated at the end of 2010. Under the plan, Sprint will consolidate multiple incompatible networks (CDMA, iDEN, and LTE) comprising 68,000 cell sites into one platform supporting multiple technologies (3G and 4G) and spectrum bands (800 MHz, 1900 MHz and 2.5 GHz) with less than 45,000 cell sites. Sprint will spend $4 billion to $5 billion under the program, over three to five years.
Sprint Nextel plans to consolidate its network and gradually terminate its iDen network from 2013. The company will replace the iDen network on CDMA-based phones in FY11, with a new version of Nextel’s “push-to-talk” feature from Qualcomm Inc. (QCOM).
This network restructuring is expected to generate $10 billion to $11 billion in savings over the next seven years through efficient use of capital, reduced energy costs, lower roaming expenses, backhaul savings and the eventual reduction of total cell sites.
The Network Vision plan is expected to reduce the company’s expenses by eliminating costs associated with the Nextel network and reducing in-network roaming. However, the benefit is not expected until 2013 as network consolidation involves large upfront payments in the first few years.
We are currently reiterating our long-term Neutral rating on Sprint supported by the Zacks #3 (Hold) Rank.
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