Analysis: Sprint, Dish could broaden partnership - but it would be complicated

Sprint (NYSE:S) is currently working with erstwhile suitor Dish Network (NASDAQ: DISH) on a trial of TD-LTE fixed wireless broadband service using Sprint's 2.5 GHz spectrum. However, analysts think there are plenty of opportunities for the companies to either expand the trial more broadly or work together in other ways that make use of their respective spectrum assets.

The potential for cooperation has been heightened by SoftBank CEO Masayoshi Son's push to have wireless become more of a direct competitor to wired broadband in the U.S. market.

Sprint and Dish have said they plan to jointly develop and deploy a fixed wireless broadband service on a trial basis in Corpus Christi, Texas. The service is expected to be available sometime in the middle of this year, and the companies said the service will initially be available in limited areas of Corpus Christi, but that they plan to expand into additional markets in the future.

One theory that's been floated by TMF Associates analyst Tim Farrar is that the companies need to "build on what they are already doing in Corpus Christ in Texas and expand that significantly."

Farrar's theory is that Dish could use its AWS-4 spectrum to deploy a fixed wireless broadband service and sell it to Dish customers. Dish would then add an extra 2.5 GHz antenna to its satellites that would create a small cell of 2.5 GHz coverage for Sprint around that location. Dish would get a payment for the work like a tower company would, but Sprint would get to more widely deploy 2.5 GHz at a fraction of the cost it would pay to normal tower companies. (Dish ended 2013 with approximately 14.05 million customers.) Dish would also be providing backhaul links over its AWS-4 spectrum.

Dish's 40 MHz of AWS-4 spectrum specifically runs from 2000-2020 MHz (for the uplink) and 2180-2200 MHz (for the downlink). Dish has asked the FCC to let it use the 2000-2020 MHz band for downlink operations instead of uplink as a condition for agreeing to bid the reserve price in the auction of the 1900 MHz PCS H Block auction, which Dish did with a winning bid of $1.564 billion. Farrar thinks Dish might also lease the 10 MHz H Block to Sprint.

To balance the revenue flow, Farrar speculated that Dish may launch wireless service of its own as an MVNO of Sprint. "Which direction the revenue could ultimately flow would depend on how big an MVNO Dish wanted to be in the mobile businesses," Farrar said, though initially revenue might flow more to Dish.

For now, the companies are keeping relatively mum on future work together. Dish declined to comment.

"Sprint and Dish are working closely on the trial and expect to provide additional details later this year in conjunction with service availability," Sprint spokesman Scott Sloat told FierceWireless. "This trial demonstrates that Sprint and Dish are capable of working together and depending on the results of the trial, Sprint and Dish may decide to expand the trial."

Other analysts discounted or at least questioned Farrar's theory. BTIG analyst Walter Piecyk said it would rely on Dish spending billions of dollars in capital expenditures to subsidize the construction of Sprint's wireless network. Moreover, he said, the coverage Sprint would get from such a scheme would not be enough to create a robust, nationwide 2.5 GHz deployment, since Dish antennas are not uniformly deployed throughout the country.

Piecyk said Sprint would be better served by accelerating its deployment of 2.5 GHz and its tri-band LTE Sprint Spark service using 8T8R radios. "It's very important for Sprint not only to increase the profile of the company, but also help in potentially getting a merger [with T-Mobile US (NYSE:TMUS)] approved to show people what 2.5 can do," he said.

Piecyk said that so far Sprint's vendors for Spark--Alcatel-Lucent (NYSE:ALU), Samsung and Nokia (NYSE:NOK) Solutions and Networks--are not getting the job done. "NSN and the other vendors will get it right at some point," he said. "The quality of Sprint's network certainly won't hinge on putting up cell sites at the homes of Dish customers."

Ultimately, Piecyk said he does not believe that Dish Chairman Charlie Ergen "has an interest in being an MVNO to Sprint. He doesn't take five years to pivot his company and aggregate spectrum in order to end up with an MVNO deal."

"It will be a challenge for Ergen and Masa to figure out a way that can benefit both companies," Piecyk added. "These are two very smart guys who are both billionaires, and I'm sure that if there's a way to come up with something then they're going to address it. But it's going to be a challenge."

New Street Research analyst Jonathan Chaplin said that he thinks it's entirely plausible for Sprint and Dish to work together more broadly. "Whatever Dish does with their spectrum (apart from sell it), they need Sprint," he wrote to FierceWireless. "Since Dish pulled out of the bidding for Sprint we have suspected that they had cut a back-room deal with Masa. The trial in Texas was the first indication that we could be right."

Chaplin noted that in 2013 when Ergen was bidding with Sprint--and by proxy, Son--for control of Clearwire's 2.5 GHz spectrum, Ergen wanted to acquire 40 MHz of spectrum from Clearwire, with a view to using AWS-4 for wireless and 2.5 GHz spectrum for backhaul--the opposite of Farrar's theory. Chaplin said it made more sense to do that since AWS-4 spectrum would produce larger cells.

Chaplin's New Street colleague, Andrew Entwistle, said while Farrar's hypothesis is "perfectly plausible," there are also "a wide range of other configurations that could also make sense, including roles for MVVDS links for backhaul." It's unclear, Entwistle said, if Sprint wants to enter a deal that would leave it dependent on Ergen, but Sprint might do so if Ergen is also dependent on Sprint.

At the end of the day, Entwistle said he thinks Son is focused on urban and suburban services, not rural only, and such a fixed wireless solution "would need either point-to-point links or at least tight beamforming, rather than traditional wide area cellular sectors." Different spectrum configurations could be used for such a scenario to work with Dish, he said, but regardless it would need to be a very dense network with lots of fairly short wireless backhaul links, he said. It would also need a lot of vendor input and support as well as the use of poles and rooftops with power supply to deploy cells.

Entwistle said any deal with Dish does not mean Sprint can't or shouldn't go full bore with own pure wireless deployment. "I would just flag that these fixed service plans need not impede Sprint's existing cellular roadmap at all (i.e. SMR/PCS/2.5GHz wide area services) because of the sheer scale of its 2.5 GHz holdings--it's easy to forget just how much freedom Sprint has from having 160 MHz in this band across almost all the key markets," he said.

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