Clearwire likely the crux of Sprint's LTE strategy

editor's corner

What a tangled weave of LTE options that Sprint Nextel (NYSE:S) has before it.  But in the end, it looks like Clearwire will once again be the crux of its next-generation strategy.

Reports leaked this week indicating that Sprint Nextel hopes to launch LTE service on its own network sometime early next year and that it plans to use G-block spectrum it previously acquired from Nextel along with the 800 MHz spectrum that is currently occupied by the Sprint iDEN network.

The deployment would be part of Sprint's Network Vision network modernization plan, which is already underway, and which is centered on multi-mode base stations that would allow Sprint to launch LTE. Sprint is scheduled to detail its 4G network strategy at an investor conference in New York on Oct. 7.

While it's smart for Sprint to have a go-it-alone strategy with LTE, it still needs to rely on partners. It just doesn't have enough spectrum alone to do an LTE deployment justice. Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) are deploying LTE networks using 20 MHz (10 MHz x 10 MHz) of spectrum,  and Sprint is expected to unveil plans that include the announcement of a 10-MHz (5 MHz x 5 MHz) configuration, said Walter Piecyk, analyst with BTIG Research in a note to clients. It's a disadvantage for Sprint because the lack of spectrum will hurt download speeds. Hence the fact that MetroPCS, which is operating LTE in a 5 MHz x 5 MHz configuration, does not tout fast data speeds.

Certainly there is much hope for Sprint's future, but it needs to move now. In July, Sprint inked a 15-year, $9 billion network hosting deal with wholesale LTE provider LightSquared in which LightSquared will pay Sprint to deploy and operate a nationwide LTE network that uses LightSquared's L-Band spectrum, and LightSquared will be able to sell network capacity via the arrangement to Sprint, other wireless carriers or retail customers. However, because of GPS interference concerns, both the FCC and National Telecommunications and Information Administration have called for more tests of LightSquared's network, throwing into doubt if or when the company will be able to launch service.

Well guess what company holds a load of spectrum? That's right, Clearwire, which currently operates a mobile WiMAX network covering more than 130 million POPs. Sprint holds a 54 percent stake in Clearwire and is its largest wholesale customer. Sprint CEO Dan Hesse said earlier this month at an investor conference that Sprint will likely discuss whether it will give Clearwire more funding at Sprint's October meeting.

Clearwire has said it will need around $600 million in additional financing for the LTE buildout and that a network overlay for TDD LTE can be completed within 12 months. The company has indicated that several vendors are willing to put forward vendor financing to win a big contract with the operator.

Piecyk believes that the most near-term solution for Sprint is to fund an accelerated upgrade of Clearwire's network to a 20 MHz x 20 MHz FD-LTE or TD-LTE channel, delivering data speeds in excess of what Verizon and AT&T could offer with their existing spectrum. With LightSquared's revised plan to use just a portion of the L-band for its LTE services, that doesn't leave much spectrum for Sprint to leverage either.

At any rate, Sprint needs to deliver a plan that isn't so convoluted that chipmakers and equipment vendors baulk at the non-traditional nature of these networks. The G-block spectrum isn't exactly a common band for LTE and vendors have to make some difficult choices in the bands that they choose to support.--Lynnette