Sprint 4G Rollout Update
Friday, March 23, 2012 - 3:14 PM MDT
Many Sprint fans were put off by the downgrade of the “S” stock and remarks of Craig Moffett of Bernstein Research released Monday morning. Moffett claimed a looming bankruptcy risk on the horizon thanks to mounting debt, Network Vision costs, and smaller channels of spectrum for their LTE network.
On top of all that, Moffett claimed that the LTE iPhone, which Sprint executives claim will secure the future of the franchise, could bring disaster for Sprint. By Friday, Shing Yin of Guggenheim Securities came out reiterating his company’s “neutral” rating on Sprint, downplaying the skepticism of Moffett and claiming that Sprint’s fledgling LTE network would handle the pressure of the LTE iPhone.
Moffett wrote that there is “little margin for error” for the newest carrier to offer Apple’s iPhone. He believes, along with many more, that the next generation of the Apple iPhone will contain LTE connectivity. He is not convinced that Apple will manufacture a version specifically with Sprint LTE connectivity, and if they do, it will prove disastrous for Sprint.
There are several notable arguments that can be presented here. Sprint is way behind Verizon and AT&T in their LTE rollout. Also, AT&T and Verizon are using larger chunks of spectrum for LTE which will serve higher data speeds and more customers than Sprint. Further, AT&T and Verizon are also better positioned to continue to provide iPhone users with sufficient speed as data growth grows in the future.
Yin believes that Sprint will surely see an iPhone that will be capable of LTE connectivity. He believes that Sprint officials would not have committed to a deal of that magnitude with Apple in 2011 if they were going to get a handcuffed version the following year.
As far as lack of capacity, he expects the network will be underutilized initially, making up for a smaller LTE carrier, noting that only 5% of Verizon’s postpaid subscribers converted to LTE handsets even though Verizon has been inundating customers with an advertising campaign built on LTE and offering double data for LTE capable phones. Yin also brought up the fact that Sprint was able to convert about 10% of their postpaid customers to WiMax devices actually selling more WiMax devices in a year than Verizon sold LTE.
Customers will buy iPhones regardless
Unless current policy is changed, Sprint has something that AT&T and Verizon are unable to offer new customers, unlimited data. Whether the data comes from 3G or 4G, new Sprint iPhone customers will be treated to an unthrottled “all you can eat buffet” of data. The “truly unlimited” offering by Sprint could even convert AT&T customers with grandfathered unlimited plans thanks to AT&T’s adoption of throttling its unlimited customers.
Many customers are unfamiliar with 4G data and what it means to them
Despite all the advertising and promotion of 4G LTE, many customers still do not know what it is and how it applies to them. Verizon sales staff may be able to promote that they offer the largest LTE network or that they are the exclusive offering of LTE in that city, but the iPhone has a wide demographic of buyers, many upgrading to their first smartphone. Initially, these new smartphone customers will not notice or care about 4G speeds, they will be overwhelmed with learning all the new features and will use less data than experienced smartphone users, putting less strain on the network.
What it all means
Sprint is definitely in a state of transition. They are in the middle of a great balancing act, between Network Vision, impending debt payments, and life support to Clearwire. If Sprint can execute Network Vision, they will streamline their entire organization, bringing network maintenance costs down, enhancing coverage, and providing customers 4G LTE technology. Sprint will become more profitable and can focus their attention on expanding their LTE offering on additional spectrum and maintaining a positive user experience.
Photos courtesy of cases.com and redmondpie.com.