Sprint’s second quarter earnings release this week was a good chance to take a step back from the soap opera that has engulfed the carrier over the past several months related to its ownership structure and witness just how the carrier was handling the important task of operating as a viable competitor in a highly competitive market.
That view showed that indeed Sprint continued to suffer performance issues tied to its operational struggles, which could continue to impact the business through at least the end of 2013. Sprint CFO Joe Euteneuer noted in an interview with RCR Wireless News that the carrier does expect continued “head winds” through the current third quarter with the carrier not gaining its operational balance until perhaps 2014.
Sprint’s performance was overshadowed by the loss of more than two million customers during the second quarter, a timeframe when its larger rivals posted solid gains and a smaller rival claims to have also found a strong reception from consumers. A significant impact on Sprint’s customer losses was the final turn down of its iDEN network, which finally rid the carrier of at least the network operations burden it packed on when it acquired Nextel Communications in 2005.
In addition to its losing more than 1.3 million iDEN customers during the quarter due to shuttering that network and failing to regain those subscribers on its CDMA/LTE platform, the second quarter also saw smaller rival T-Mobile US gain access to Apple’s iPhone devices that also included an aggressive marketing push that looks to have gained some share at the expense of Sprint. While Sprint did claim to have sold 1.4 million iPhones during the quarter, that was down from the previous quarter, with even a smaller percentage going to new customers (43% to 41%).
With Softbank now helping to fund operations and Clearwire bringing on board full control of a deep 2.5 GHz spectrum pool, Sprint does at least appear to have the pieces in place to become a force in the mobile broadband space. Sprint management noted that it had more than 20,000 cell sites on air supporting LTE services through its Network Vision program. That number has allowed the carrier to launch LTE in 151 markets, though it continues to lag in coverage in a number of larger metro areas.
To support that rollout, Sprint posted a sequential increase in capital expenditures during the second quarter, hitting $1.9 billion with $1.5 billion of that targeted at Network Vision. The carrier said it expects those expenses to increase through the rest of the year with full-year capex hitting $8 billion, which is $2 billion more than it spent in 2012. Steve Elfman, president of network operations for Sprint, noted that it had zoning completed on 35,000 sites tied to Network Vision, leasing completed on 34,000 sites and that construction has begun on 30,000 sites.
As for the performance of that network, Sprint claims customers are witnessing downlink speeds up to 8 megabits per second, with uplink speeds of up to 3 Mbps. While competitive in the big picture with what its rivals are pulling with their respective LTE networks, the numbers do seem to show the limitation of Sprint’s current 10 megahertz of spectrum dedicated to the technology compared with 20 megahertz being used by rivals. Verizon Wireless promotes downlink speeds of up to 12 Mbps and uplink speeds up to 5 Mbps, while a recent report from Root Metrics showed even higher speeds out in the field.
Sprint has managed to pick up new spectrum assets in recent months in the 1.9 GHz band that it plans to use in support of LTE services in select markets, which should bolster – on a limited basis – its initial LTE deployment.
The 2.5 GHz spectrum should help the carrier close that gap, though Sprint said it does not expect that spectrum to be utilized across its network in support of TDD-LTE services until next year. Tapping into those speeds could be a challenge as well as customers will have to have devices supporting that technology variation and spectrum band, which for smartphones is not expected until later this year or early 2014. Sprint has recently rolled out mobile hot spot devices that can access that technology iteration, though the market for such devices remains small.
Sprint is looking to spread the 2.5 GHz spectrum across as much of its footprint as possible, with Elfman noting that the carrier planned to have 2.5 GHz support on more than 38,000 cell sites at some point. That number lines up with what Sprint has planned for its Network Vision coverage architecture, though it remains to be seen if the carrier will shift some of that 2.5 GHz coverage focus from more rural locations to increased site deployments in urban areas in order to provide increased capacity.
As has been a common sentiment from Sprint over the past several years, the future does indeed show promise. However, this time with all the pieces seemingly in place the past excuses will no longer appear as valid should the carrier again stumble.
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