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Sprint abandons pursuit of H Block spectrum

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Sprint (NYSE:S) stunned the market and said it will not participate in the Jan. 22 auction of the 1900 MHz PCS H Block. The news surprised the industry because Sprint owns spectrum directly adjacent to the H Block and was considered a key contender for the spectrum.

Joe Euteneuer, Sprint

Euteneuer (Source: Sprint)

Speaking at the Wells Fargo Tech, Media & Telecom Conference, Sprint CFO Joe Euteneuer said that given Sprint's existing spectrum position, especially with the trove of 2.5 GHZ airwaves it acquired along with Clearwire, the company does not feel the need to go after the H Block, which sits right next to the PCS G Block spectrum it is currently using for LTE service.

"Given our belief for the lower-band spectrum, we have made the decision not to participate in that auction," Euteneuer said. He said the FCC's rules for the spectrum, coupled with several other factors, made it less palatable. Regarding Euteneuer's remark about lower-band spectrum, he likely was referring to the FCC's forthcoming incentive auctions of 600 MHz broadcast TV spectrum, currently scheduled for next year.

Dish Network (NASDAQ: DISH) has agreed to bid the reserve price of $1.56 billion in the H Block auction, but now appears to be the lead bidder with both Sprint and T-Mobile US (NYSE:TMUS) indicating they will not participate.  

The H Block is a 10 MHz block of paired airwaves that runs from 1915-1920 MHz (for the uplink) and from 1995-2000 MHz (for the downlink). Dish controls spectrum adjacent to a portion of the H Block, called AWS-4; Dish's 40 MHz of AWS-4 spectrum specifically runs from 2000-2020 MHz (for the uplink) and 2180-2200 MHz (for the downlink).

However, Dish has asked the FCC to let it use the 2000-2020 MHz band spectrum for downlink operations instead of uplink. If the FCC grants that request and then Dish wins the H Block auction,  it will have even more spectrum for downlink operations. Further, LightSquared has asked the FCC to let it use its L-band spectrum for uplink operations; Dish is the leading bidder to win LightSquared's airwaves in an auction in bankruptcy proceedings on Nov. 25.

The H Block spectrum will be auctioned in 176 individual Economic Areas across the country.  The proceeds of the auction will be used to build a nationwide public safety broadband network, though the H Block auction will only cover a small portion of the full cost of building that network.

"With the launch of Sprint Spark, Sprint is working to deploy its 2.5 GHz licenses along with licenses in 800 MHz and 1.9 MHz to provide customers greater network speeds and capacity. We expect to offer Sprint Spark in approximately 100 of the largest U.S. cities by the end of 2016," Sprint said in a separate statement in conjunction with Euteneuer's comments.

Sprint's has dubbed its tri-mode LTE service as "Sprint Spark."  The company has said the service, which combines 800 MHz, 1.9 GHz and 2.5 GHz LTE spectrum, will come to the top 100 U.S. markets during the next three years with speeds capable of reaching 50-60 Mbps and perhaps faster.

The first markets with limited availability of Sprint Spark will be Chicago, Los Angeles, New York, Miami and Tampa, and is rolling out its LTE in waves. Sprint expects to cover 200 million POPs with LTE on its 1.9 GHz spectrum by the end of 2013, and will expand that to 250 million POPs by mid-2014.

The company has also started deploying LTE in its 800 MHz spectrum, which was freed up from the closure of its Nextel iDEN network. That deployment will continue into 2014. 

As for its 2.5 GHz spectrum, Sprint plans to have 5,000 2.5 GHz TD-LTE sites on air by year end, a goal in line with Clearwire's previous buildout plans. Sprint expects to cover 100 million POPs with 2.5 GHz LTE by the end of 2014. Sprint controls 120 MHz of 2.5 GHz spectrum in 90 of the top 100 U.S. markets.

Euteneuer said that in the fourth quarter Sprint will launch six to eight tri-mode lTE smartphones and that all of its phones next year will be tri-mode. "We now have a way to utilize 2.5 as a speed differentiation because of that capacity we have," he said, adding that Sprint will start deploying small cells next year. "The network experience just becomes much richer and we're hoping this key differentiation, when complete, is speed," he said.

The Sprint CFO also said the carrier will work to maintain its unlimited smartphone data pricing, and that CEO Dan Hesse continually pushes the management team to see whether it is financially viable. "We are trying to protect unlimited for as long as it's possible," Euteneuer said. "If it doesn't become viable anymore then we would stop. But it's something we think we have a good long runway with."

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Related Articles:
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Sprint Spark to combine LTE in 800 MHz, 1.9 GHz and 2.5 GHz, will offer 50-60 Mbps peak speeds
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Dish: We likely won't 'meaningfully participate' in H Block auction