SoftBank CEO Masayoshi Son said that Sprint (NYSE:S) investors need to be patient as the carrier undergoes the next chapter in its turnaround under SoftBank control, and warned that real progress might take another two years to achieve.
SoftBank completed its $21.6 billion acquisition of 78 percent of Sprint in July, and has since upped its stake to more than 80 percent. However, Sprint's stock has fallen by 14 percent since early August.
Son is famous for taking over Vodafone's Japanese wireless operations and turning the operation into a powerhouse in the Japanese market. However, Son said that it would take time for Sprint to show meaningful gains in key metrics like subscriber growth.
"It took around a year after SoftBank bought Vodafone (before) we reached the No. 1 position of net gains in subscribers. It takes time to get devices ready and prepare services and the network," he told reporters at an event in Tokyo on Monday, according to Reuters. "At the very least you need half a year or a year. And for anything substantial you need one or two years."
Sprint is still in the midst of its Network Vision network modernization project. The project includes the deployment of LTE network technology and the shuttering of Sprint's legacy iDEN network. The carrier said that the iDEN shutdown will continue to drag on its results in the second half of this year as "mixed" business accounts that had both iDEN and Sprint CDMA services choose to go elsewhere.
Sprint is also busy integrating Clearwire into its business and network. By the end of the year, Sprint aims to have LTE covering 200 million POPs via its 1900 MHz spectrum, and there will be around 5,000 Clearwire sites deployed using TD-LTE on 2.5 GHz spectrum. Sprint is evaluating vendors now to build out a nationwide TD-LTE network on the 2.5 GHz spectrum. Sprint 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 starting next year.
"Our goal is to build the best network of any carrier in the world and we think we will have that when we're done," Hesse said in a recent interview with CNBC's Jim Cramer. Hesse reiterated that Sprint plans to increase its network marketing as it nears the end of its Network Vision network upgrade program. "That's when we're going to put a little more pedal to the metal in terms of offers and marketing, when the network transition is mainly behind us," he said.
In a research note late last month, New Street Research analyst Jonathan Chaplin wrote that he now expects Sprint to lose a total of 1.2 million subscribers in 2014 compared with his previous expectation for 100,000 net subscriber additions next year.
"We continue to believe Sprint will take significant share once they have deployed their 2.5 GHz spectrum giving them a speed and capacity advantage; however, it will take longer than expected," he wrote. "In the meantime, postpaid adds will likely decline for longer than expected and EBITDA will be pressured by higher network costs. New investors may be reluctant to buy into the long-term growth story until sub trends improve."
Other analysts also warned of a long road ahead. "If they want to get the truly national coverage that you get with one of the incumbent providers then I think they'll have to spend a lot more money," Joe Pasqualichio, equity analyst at Eaton Vance, told Reuters. He also said Sprint will have to go after family plan customers from Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) and get them to switch, but he and other analysts warned that Sprint may wind up going after market share at the expense of revenue growth.
"I want to see progress in terms of the 4G network build out. I don't want to see a big delay," said Di Zhou, an equity analyst at Thornburg Investment Management, which has been a longtime SoftBank shareholder. She said "once they have a national network, I want to see lower churn and eventually gaining market share."
- see this Reuters article
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