Sprint CFO: SoftBank deal lets us take Clearwire spectrum nationwide

Sprint won't use Huawei equipment in 2.5 GHz buildout
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Sprint (NYSE:S) will be able to deploy Clearwire's 2.5 GHz spectrum for TD-LTE service on a nationwide basis now that it is flush with fresh capital from SoftBank, which now controls 78 percent of Sprint, according to Sprint CFO Joe Euteneuer. Sprint formally took control of Clearwire earlier this month.

Steve Elfman, president of network operations at Sprint, noted during the company's second-quarter earnings conference call that Sprint now plans to deploy Clearwire's 2.5 GHz spectrum on all 38,000 of its planned Network Vision cell sites and even more sites than that in a nationwide rollout. Previously, Sprint had said it would use Clearwire's spectrum as a "hotspot" LTE network to offload traffic in urban markets.

In an interview with FierceWireless, Euteneuer said SoftBank's $21.6 billion acquisition--which includes $5 billion in new capital and allowed Sprint to buy Clearwire--spurred Sprint to make the shift in strategy. The move will let Sprint add more capacity to its own FDD-LTE network, which it is still in the process of being built out. Euteneuer noted that Sprint and Clearwire originally planned to deploy Clearwire's spectrum on around 5,000 cell sites as an offload network in urban markets. Those plans are still proceeding this year, but Sprint now wants to expand that to improve the customer experience.

"Now that we own 100 percent of Clearwire, with the help of SoftBank, we said, how do we take full advantage of the 2.5 GHz spectrum?" Euteneuer said. "The best way to do that is to have it fully integrated with the rest of your spectrum capabilities. And to do that you really need to put it on every tower."

The Sprint CFO said because of the weaker propagation characteristics of 2.5 GHz, Sprint will deploy small cells and other sites beyond the 38,000 Network Vision sites the company has mapped out. He said it is unclear at this point if the nationwide deployment of Clearwire's spectrum will be finished by the end of 2014. Clearwire commands around 160 MHz of spectrum in the top 100 markets.

It is unclear exactly how many TD-LTE cell sites using Clearwire's spectrum will be online by year-end. Iyad Tarazi, head of network development and integration for Sprint, recently told CNET that Sprint will have 5,000 Clearwire sites on air by year-end, but on Tuesday Elfman was less specific, and said "we'll have several thousand sites up this year because of the work that Clearwire was doing before us."

"We are working with Clearwire on plans and will share more soon," Sprint spokeswoman Roni Singleton said in a follow-up statement.

Looking ahead though, Elfman said the 2.5 GHz expansion will proceed at a brisk clip. "It will not be fully built up, but it will be quite a bit easier than the current Network Vision plan because we will already have backhaul," Elfman said of the 2.5 GHz expansion, according to a Seeking Alpha transcript. "We will already have done most of the leasing and it will be more of an overlay effect the way you're seeing our competitors do overlay LTE network. So it will move much faster than the current Network Vision plan."

Euetneuer said the cost of the 2.5 GHz buildout is already included in Sprint's network spending projections. "Clearly we think we can do it in the constructs of the capital that's already been put out there," he said. Sprint plans to spend $8 billion on capital expenditures in 2013, and, according to a proxy statement Sprint filed in June with the Securities and Exchange Commissions, envisions spending $8 billion in 2014.

The expanded Clearwire deployment will require adding antennas to cell sites, Euteneuer said, not just replacing line cards. However, he said the added capacity will bring a noticeable improvement in customers' real-world speeds, though he did not specify what kind of speeds customers will see when they access Clearwire's spectrum for TD-LTE service.

Euteneuer said Huawei gear will not be part of the expanded Clearwire network. "We made a commitment that we will take Huawei out of the Clearwire network," he said. Sprint agreed to give the U.S. government oversight of its network vendors as a condition of SoftBank acquisition of the company. The action was a response to concerns that China would be able to use equipment from Huawei and ZTE to spy on Americans--ZTE and Huawei have vehemently denied those claims.

The expanded Clearwire deployment will likely be carried out by Network Vision vendors Alcatel-Lucent (NASDAQ: ALU), Ericsson (NASDAQ:ERIC) and Samsung, or perhaps by another vendor as well, Euteneuer said, depending on how the contracts get ironed out.

Sprint CEO Dan Hesse said the deployment of a nationwide LTE network on 2.5 GHz will help give Sprint "competitive parity" with its rivals. "And the important thing in terms of what we believe will be a better, a superior network experience will depend upon how quickly we roll out the 2.5 [GHz spectrum], because that will give us extraordinary capacity and some speed and performance advantages in the market," he said.

Analysts said the deployment will help Sprint, but that it will take time to translate into material results for the company. "TBR believes Sprint will keep the TD-LTE network and will use it to improve its existing FDD-LTE network," TBR analyst Eric Costa wrote in a research note. "The acquisition of Clearwire greatly improved Sprint's position in the wireless market, yet the operator is unlikely to gain market share from AT&T and Verizon until at least 2015 as Sprint invests to build out its network over the newly acquired spectrum."

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