Investors in rural wireless operator Ntelos were spooked this morning on news that roaming partner Sprint was looking to overbuild LTE coverage across portions of Ntelos’ markets.
FBR Capital noted in a research report that Sprint was currently on track to build out LTE coverage in portions of Ntelos’ markets beginning as early as next year. Ntelos is currently a roaming partner with Sprint, providing CDMA services to Sprint customers that roam into its markets as well as tapping Sprint for nationwide roaming coverage. FBR added that the overbuild could be accomplished in conjunction with regional operator Shenandoah Telecommunications.
“Our checks indicate that Sprint is building its business case to justify the overbuild and is considering outsourcing the overbuild of the wholesale region to Shentel, a Sprint affiliate partner that covers an adjacent territory,” explained FBR analyst David Dixon. “However, Sprint is no longer capital constrained and may not want to give up owner economics.”
The news sent Ntelos’ stock (NTLS) down more than 13% in early Monday trading.
Ntelos, which recently reported solid second quarter financial results, said it remains on track to launch commercial LTE services across portions of its network during the second half of this year. The carrier had previously announced plans to have 70% of its potential customer base covered with LTE services by the end of 2014, with the network serving both its own customers as well as roaming customers from Sprint. Ntelos noted that devices for the network would support Band Class 2, 4 and 25, hinting that the LTE service would tap into the traditional 1.9 GHz spectrum (Band Class 2) currently used to support its CDMA-based network as well as that of Sprint Nextel; Ntelos’ 1.7/2.1 GHz spectrum holdings (Band Class 4); and the G-Block 1.9 GHz spectrum (Band Class 25) that Sprint Nextel is using for its initial LTE rollout. Ntelos is currently using the approximately 23 megahertz of 1.9 GHz spectrum to support its CDMA services, with approximately 20 megahertz of 1.7/2.1 GHz spectrum that has yet to be deployed.
Ntelos currently has a network alliance agreement with Sprint that is set to run through 2015 for CDMA services, though the two operators have been working through billing issues related to roaming expenses. Ntelos reported that the agreement provides a minimum of $9 million per month in revenues.
Sprint last year signed an agreement with Shentel that calls for the network partner to mimic Sprint Nextel’s LTE plans, with Shenandoah receiving access to additional spectrum in the 1.9 GHz and 800 MHz band from Sprint Nextel.
Sprint recently gained financial support through a majority acquisition by Japan’s Softbank. That deal included Softbank buying a 78% stake in Sprint for $21.6 billion.
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