Sprint is said to be readying the financing to make its long-expected bid for T-Mobile USA, if its parent Softbank decides to put ambition ahead of concerns about regulatory hostility. It may be encouraged to move by T-Mobile’s most recent quarterly results, which saw the fourth cellco’s ‘Uncarrier’ strategy bearing fruit, outdoing the three larger players in terms of net additions (2.4m, with 1.3m in the postpaid market where TMo has been weak in recent years, as has Sprint).
For now, though, the two operators remain bitter rivals, both engaging in price wars in the prepaid segment where they have seen most growth, while chasing higher value customers with various strategic shifts. In Sprint’s case, the quest for a return to postpaid growth has centered on delivering an excellent network, harnessing its plentiful spectrum for the multimode Spark LTE service, which claims speeds of 60Mbps.
T-Mobile is also building out LTE, and has received strong ratings for the speed of its offering, but it is behind the big two in coverage, and so has relied more heavily on new propositions to win postpaid users ‘ notably the disruptive ‘Uncarrier’ tactics, which replace subsidies with instalment payments for handsets, among other changes.
However, the company says its days of competing almost entirely on price and services are over ‘ it will soon be able to use its network as a competitive weapon too. TMo’s CTO, Neville Ray, managed to throw cold water on Spark on his blog, where he was announcing the closure of his firm’s important purchase of 700MHz A Band spectrum from Verizon, bringing low frequencies into the portfolio for the first time to help with rural coverage.
‘We’ve already enhanced our LTE by deploying 10+10MHz 4G LTE in 43 of the top 50 metro areas, delivering download speeds up to 72Mbps,’ he wrote. ‘Yesterday, we heard that the Sprint Spark network will eventually deliver 60Mbps. What’s more, last November, we began deployments of Wideband LTE with 15+15MHz and 20+20MHz. What that means is that we’re building 4G LTE superhighways that are incredibly fast and wide open — and where you can experience download speeds up to 147Mbps.’
These factors will drive Sprint, which has suffered delays in its ambitious network modernization program, to ever greater efforts to deliver its 4G promises, both to attract customers and to improve its negotiating position if it bids for TMo. Its latest move is to complete lab testing of new TD-LTE radios, with eight transmitters and eight receivers (8T8R) per box, which will give its network a significant speed boost . Field testing of the 8T8R gear has now begun with its three vendors, Ericsson, Alcatel-Lucent and Samsung, with commercial implementation expected, as an overlay to existing base stations, in a couple of months’ time.
When used at the cell site in conjunction with MIMO antenna arrays, 8T8R can give Sprint greater range in the 2.5GHz band, whose main drawback is limited reach. The overlay will coincide with the completion of Sprint’s replacement of its 3G network and LTE will cover 250m POPs, while it will also add HD Voice nationwide (to enhance voice quality rather than racing towards VoLTE). It now offers Spark in 24 markets with 14 triband devices including the new Samsung Galaxy S5 and HTC One.
These activities are vital to reduce churn, which has plagued Sprint ever since it acquired Nextel. CEO Dan Hesse said on the company’s Q114 earnings call that network issues are the single biggest cause of customer defections, and Sprint lost 231,000 postpaid and 364,000 prepaid subscribers in the quarter. “The network is obviously a crucial foundation for being competitive,” he said. “It almost doesn’t matter what your offer price is if your network is not strong.”
As it expands TD-LTE, Sprint is gearing up to close its WiMAX services, inherited with the Clearwire acquisition and once the basis of the firm’s initial 4G efforts. It expects to shutter at least 6,000 cell sites and close WiMAX completely by the end of next year. According to an SEC filing, when Sprint took full control of Clearwire last summer the company had deployed WiMAX on around 17,000 cell sites and was in the process of deploying TD-LTE technology on around 5,000 of those, a job that is now complete. Sprint will expand its own Spark roll-out to another 5,000 legacy Clearwire sites in order to reach its target of 100 triband markets by 2016. However, it will not deploy TD-LTE on all the Clearwire locations and will decommission about 6,000, incurring costs of $50m to $100m.
As part of its preparation to shutter WiMAX, Sprint revised the terms of service for Clearwire subscribers, saying it “expressly reserves the right to migrate” customers from WiMAX to Sprint’s LTE service with ‘reasonable advance notice”.
While Sprint’s acquisition of Clearwire was all about securing a massive spectrum advantage in capacity terms, that advantage will be reduced somewhat by FCC plans to include much of its 2.5GHz portfolio in new spectrum screens, along with the frequencies held by Dish Network. The FCC wants to make changes to the screen in conjunction with issuing proposed rules for the incentive auction of 600MHz broadcast spectrum next year. Rules for both proceedings will be voted on by the FCC at its May 15 meeting.
The new screen would only affect transactions after the auctions of AWS-3 spectrum later this year and of 600MHz in mid-2015. It would allow the FCC to count higher-band frequencies like Sprint’s 2.5GHz in its screen. Dish’s 40 MHz of AWS-4 spectrum and newly acquired 10MHz block in the 1.9GHz H Block would also be counted, but not the 700MHz D Block public safety spectrum. Sprint and Dish’s spectrum will be added to the screen because the FCC determined that the airwaves are suitable and available for mobile broadband use, an official said.
Also controversial is the FCC’s consideration of a system of reserved bidding for the 600MHz licences. It wants to encourage competition by restricting the ability of Verizon Wireless and AT&T to bid. The regulator proposes establishing a market-based reserve of up to 30MHz for carriers which currently hold less than one-third of available sub-1GHz frequencies. There would be a trigger point, as-yet undefined, during the pre-auction process, to decide at what point the sale would be split into reserved and unreserved bidding. It plans to auction the spectrum in Partial Economic Area licence sizes, the middle ground between large Economic Areas and smaller Cellular Markets Areas.
The FCC official gave the example that, if there was 100MHz of spectrum to bid on, no more than 30MHz would be reserved for eligible bidders. However, if eligible bidders demanded only 20MHz in a given market when the trigger was met, then only 20MHz would be reserved, and 80MHz would remain unreserved.
When the rules were first suggested last month AT&T said it might reconsider participating in the auction at all, though it has since mellowed and wrote in an FCC filing last week: “Our desire to participate in this auction and our hope for a successful auction is unchanged. We believe that all stakeholders will be able to work together to achieve a successful incentive auction for the 600MHz band.”