SoftBank is lighting a fire under Sprint - I'll be waiting for the results
Before SoftBank's $21.6 billion deal to take control of Sprint (NYSE:S) was finalized, Sprint formally referred to the after-transaction company as "New Sprint." Nearly six months after Sprint shareholders approved the deal, it seems like the new Sprint is finally starting to emerge. SoftBank, which now controls around 80 percent of Sprint, has given the No. 3 carrier a mandate to build the fastest and most robust LTE network in the U.S., and perhaps the world. Whether Sprint can deliver on that expectation will be the game to watch for all of 2014.
SoftBank's influence over Sprint may be subtle but it's clear that without the Japanese company's money and input Sprint's major network push for the future, its tri-mode LTE service dubbed "Sprint Spark," would not be possible. Bob Azzi, Sprint's chief network officer, acknowledged as much in a recent interview with FierceWireless, noting that the success of Spark relies mainly on a nationwide deployment made possible with Clearwire's 2.5 GHz spectrum.
More importantly, Spark also relies on massive new 2.5 GHz radios with capabilities for 8 Transmitters 8 Receivers (8T8R), which Sprint has said will be the first deployment of its kind in North America. Azzi said Sprint's network team worked with SoftBank technologists to glean lessons from SoftBank's real-world deployment of TD-LTE on 2.5 GHz in Japan. The two teams collaborated on "specific technical nuances" of the radios. Additionally, Sprint and SoftBank also joined forces when it came to evaluating vendors for the new radios.
Azzi noted that SoftBank had much deeper experience with Nokia Solutions and Networks (NYSE:NOK), which had not been a vendor for Sprint's Network Vision network modernization project. SoftBank not only recommended NSN but connected Sprint executives with counterparts at NSN more quickly and effectively than Sprint officials would have been able to by themselves. "It's a better outcome than we would have gotten on our own," he said.
New Street Research analyst Felix Wai said SoftBank's involvement also likely impacted Sprint's spectrum planning process, especially its decision to forgo bidding for the 1900 MHz PCS H Block, a block of spectrum that sits right next to the G Block spectrum that Sprint used to deploy its existing LTE network. "Once you get the Clearwire asset, you no longer need the H Block" for additional capacity, Wai said.
Azzi said the deployment of the new infrastructure using the 2.5 GHz spectrum, which Sprint hopes to bring to 100 million POPs by the end of 2014, is the most tangible area in which Sprint and SoftBank have collaborated.
Sprint CEO Dan Hesse said at a UBS investor conference Tuesday that the companies have face-to-face to meetings between executives, including SoftBank CEO Masayoshi Son, once a month. These meeting are usually held in California. Beyond that, there are regular conference calls and video conferences, all the way down to the vendor level, Azzi said.
Wai said he thinks SoftBank's executives--Son in particular--have indicated to Sprint that Sprint needs to pick up the pace on network modernization, with Spark especially. "If someone invests this amount of capital in you, they expect to see a return in a reasonable timeframe," he said. "The ways these guys paint Masa is as of agent of change," Wai added.
"Organizationally, I'd say it's too early to tell," what impact SoftBank has made on Sprint, Wai said. "You get a sense they are lighting a fire under them, but only time will tell if that translates into execution."
Hesse said at the investor conference that by mid-2014, Sprint will be far enough along with Network Vision and the rollout of Sprint Spark that it can mount a national marketing campaign to tout its network.
I understand that Sprint had to wait for the Nextel iDEN network to shut down at the end of June before it could start repurposing 800 MHz spectrum for LTE. The company also had to wait for the Clearwire deal to close this summer before taking control of the 2.5 GHz spectrum--and it didn't get much help from Dish Network (NASDAQ: DISH), which prolonged the process and made Sprint pay more for Clearwire.
Yet T-Mobile US (NYSE:TMUS) launched LTE service in late March and by early October had 202 million POPs covered. By contrast, Sprint launched LTE service in July 2012, and still has not announced 200 million POPs covered. Why is Sprint working half as fast as T-Mobile, which has proven itself to be a nimble competitor this year?
Sprint is going to have to start executing faster and better if it wants Spark to be a success. Verizon Wireless (NYSE:VZ) is starting to boost capacity on its LTE network via AWS spectrum, and T-Mobile has indicated it will boost LTE capacity next year as well.
I think Spark is a phenomenal idea on paper, especially if it can deliver the real-world peak speeds Sprint has promised--50-60 Mbps in the near-to-medium term and 150-180 Mbps in two years. However, Sprint has to get that network running--and that means doing the zoning, leasing and deploying--a lot faster and more effectively than it has with Network Vision.
I'm sure SoftBank and Son will be pushing Sprint to do so. That may be the clearest measure of SoftBank's influence on Sprint.--Phil