Sprint tweaks 2.5 GHz LTE deployment strategy to target congested parts of network

Sprint (NYSE: S) still plans to deploy its 2.5 GHz spectrum on a nationwide basis but is going to change its approach to how it rolls out the spectrum to be more targeted on congested points of its network. Sprint CEO Marcelo Claure detailed the change in Sprint's 2.5 GHz buildout approach in comments he made during his first investor conference.

"When I got there, the initial plan is, let's just deploy 2.5 [GHz] across our 33,000 sites [cell sites]," Claure said, according to a Seeking Alpha transcript of his remarks at the Goldman Sachs Communacopia Conference. "What it means is it takes you too long to be good anywhere." Claure took over as Sprint's CEO a month ago. "So we are changing our deployment plan that's going to be really, really focused on 2.5," he said. "First we are going to focus in areas where our network is congested."

Claure noted that all carriers have congested points in their network but that 2.5 GHz spectrum is a unique resource that provides a great deal of capacity, which can enhance the user experience.

"And then secondly, we are going to go strong after a few cities rather than building out the 33,000 [2.5 GHz cell] sites," Claure said. "We are going to first focus on getting a certain amount of cities, where we can provide customers our end-to-end experience."

"So, now once we build 2.5 in some selected markets that we will be announcing soon, we are going to focus on those markets and provide an experience of the speeds that haven't been deployed in the U.S.," Claure said. "So, you are going to see a really, really focused effort in terms of where do we deploy it and how do we use our capital and capex a lot more effective than we have had. There is no need to plaster the nation with 2.5, because it's going to take us too long. So, we want to get some early wins by providing [the experience 2.5 GHz spectrum can deliver]."

Sprint spokeswoman Kelly Schlageter said the company still intends to deploy 2.5 GHz nationwide. "We have not changed our strategy in deploying 2.5," she said. "We're on track to cover 100 million POPs by the end of the year, and in the next phase of deployment we'll focus on dense builds in key markets."

Schlageter said Sprint's approach with its 2.5 GHz deployment will be different than its 1900 MHz LTE rollout in that it will be denser and more targeted. She added: "The intent is to deploy nationwide. It's just the approach is more surgical."

Sprint has around 120 to 150 MHz of 2.5 GHz spectrum in the top 100 markets, and that trove of airwaves is the key element of Sprint's tri-band LTE Spark service, which also includes 800 MHz and 1900 MHz spectrum. Sprint says Spark currently produces peak downlink speeds of 50-60 Mbps. But by the end of the year, Sprint has said it will deploy two-carrier carrier aggregation on its 2.5 GHz TD-LTE service, producing peak downlink speeds over 100 Mbps. Sprint has been seeding its customer base with devices that can take advantage of those capabilities.

Rival U.S. carriers are concerned about the "peak wars" that Sprint might initiate using its vast 2.5 GHz spectrum holdings, Mike Murphy, Nokia Networks' (NYSE:NOK) head of technology for North America, recently told FierceWirelessTech. Nokia is one of Sprint's three vendors, along with Alcatel-Lucent (NYSE: ALU) and Samsung, for its 8T8R (eight transmitters/eight receivers) radios for TD-LTE service in the 2.5 GHz band.

"Because they [Sprint] have so much spectrum, they have the ability to offer very, very high bit rates," Murphy said.

Nokia has held "a lot of discussions" with its other carrier customers regarding ways they might compete against Sprint if serious marketing battles over peak data rates come to fruition, Murphy said during a breakfast meeting with a handful of reporters on the sidelines of CTIA's Super Mobility Week conference.

Sprint covers around 254 million POPs with LTE on its 1900 MHz spectrum, but that is only using a 5x5 MHz deployment, so that limits how much capacity the company has with that spectrum and the speeds it can deliver. Sprint is also using 800 MHz LTE for coverage and intends to cover 150 million POPs with that spectrum by the end of 2014.

In comparison, Verizon Wireless (NYSE: VZ) covers 306 million POPs with its LTE network and AT&T Mobility (NYSE: T)covers 300 million. Both are adding in more spectrum, especially in the AWS band, to augment capacity on their 700 MHz networks.

Meanwhile, T-Mobile US (NYSE:TMUS) covers 235 million POPs with LTE and intends to expand that to 250 million by year-end and more than 280 million by mid-2015. T-Mobile has also been deploying Wideband LTE (its marketing terms for LTE networks with at least 15x15 MHz configurations), which it now offers in 17 markets. T-Mobile said it will deploy Wideband LTE in 26 markets by year-end.

Analysts said that Sprint's new approach to its 2.5 GHz buildout will be more efficient but could leave the impression that its network is not up to par with the networks of its rivals.

"Management has clearly moved away from a ubiquitous 2.5 GHz network, and instead will be much more targeted," Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note. "Mr. Claure believes there are large geographical areas of the country that will be served with LTE on 800 MHz and 1.9 GHz."

Credit Suisse analysts Joseph Mastrogiovanni and Michael Baresich wrote in a research note that Sprint "will address congested markets first and follow with a local market by market approach after hitting 100M POPs. This is similar to what's been done in Japan."

"While this will be more capital efficient, we wonder if it will hamper the company's success," they added. "Sprint expects its large swath of 2.5 GHz to allow it to build a differentiated network. A targeted approach could limit this success, as the differentiation won't be available nationwide (customers could become agitated if their service degrades during travel) and the marketing message around the network could be confusing."

For more:
- see this Seeking Alpha transcript

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