Sprint lost $180M on abandoned monopole network build-out plan

In its most recent filing with the FCC, Sprint noted its capex spending largely trails that of its competitors. (Sprint)

Sprint provided its clearest view yet on the company’s attempts to reduce its network expenses by building out monopoles for network coverage, instead of using traditional cell towers. The company also reiterated the price tag for its failed venture: $180 million in abandoned equipment.

The details of Sprint’s now-discontinued monopole network build-out plan were contained in a lengthy filing the company made this week with the FCC in relation to its attempts to merge with T-Mobile. The filing essentially reiterated many of the issues the company brought up in June about its tenuous position in the marketplace and how it doesn’t believe it will be able to compete against market heavyweights like AT&T and Verizon.

As for its monopole build-out strategy, Sprint said that in 2015 it embarked on a “monopole plan to save on network costs.” The company didn’t provide any further details on the details of that plan, but it appears to align with a report from Recode in 2016 of a plan by Sprint to cut up to $1 billion in costs via contracts with the likes of Mobilitie and other small cell vendors to relocate its network equipment on “mini macros” located on government land rather than on standard cell towers owned by the likes of American Tower and Crown Castle. The Wall Street Journal, too, reported on Sprint’s plans to deploy up to 70,000 small cells in cities across the country, largely through vendor Mobilitie.

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However, those efforts were reportedly slowed by the companies’ difficulties in obtaining permits for the small cells.

Further, according to a memo obtained by Event Driven in 2017, Sprint granted Mobilitie permission to commence construction on monopoles “without necessarily securing certain build prerequisites.” Roughly a year after that report, the FCC announced that Sprint and Mobilitie agreed to jointly pay an $11.6 million fine because the companies did not obtain the proper permits to build small cells.

Then, in an SEC filing late last year, Sprint said that during the course of 2017 the company recorded losses totaling $180 million that “were related to $181 million of cell site construction costs that are no longer recoverable as a result of changes in our network plans during the three-month period ended June 30, 2017.”

That appears to dovetail with the figures contained in Sprint’s latest filing with the FCC this week, in which it acknowledged that its “monopole plan [was] abandoned for more traditional build; $180M write off in abandoned sites.”

Details of Sprint’s abandoned monopole network build-out plan were among many disclosures the company made of its efforts to cut costs and entice new customers. For example, the company said it has successfully eliminated about $10 billion in annual costs in recent years, but that it “has not been able to invest sufficient capital to achieve network performance necessary to attract and retain enough subscribers to improve its scale.”

The company also disclosed its efforts to create a “localization” strategy in which it worked to develop specific promotions in specific markets: Chicago, Cleveland, Cincinnati, Orlando, Miami and Dallas-Fort Worth. “‘Localization 2.0’ strategy involved increases in local marketing, network spend, and retail distribution in specific cities, but the program has not met targets needed to support investments,” the company said.

Further, Sprint said that its pricing promotions in recent yearsfor example, Sprint has offered half-off the competition’s price, as well as free service for a yearhaven’t given the company momentum in the market. “At the end of 2017, Sprint Finance assessed the impact of Sprint’s aggressive pricing and concluded that it was not resulting in adequate customer growth or retention to pay for itself,” the company said this week.

Indeed, the company just last month again raised the cost of its most expensive unlimited plan.

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