Just last week, Sprint finally lit up its LTE network. Not before selling a number of LTE-equipped phones, however. If you were worried about Sprint's ability to keep up with the big dogs in the race to expand LTE coverage, the WSJ has some comforting words for you. Wait, did I say "comforting"? I'm sorry, I meant worrying. Very, very worrying.

The long and short of it is, Sprint simply doesn't seem to have enough spectrum to keep up. The initial LTE rollout covered 15 markets, compared to Verizon's 330 and AT&T's 47. Despite the rather distant third-place position, Sprint hopes to have coverage in all areas by the end of 2013.

Unfortunately, covering a market isn't exactly an on-or-off type situation. In a dramatically oversimplified and probably less-than-accurate analogy, you can think of spectrum as lanes on a highway. Sprint may possess enough spectrum to open a two-lane highway in a city, but if they get enough traffic to fill a five-lane highway, they'll still need more spectrum.

Sprint is trying to offset the impending data crunch by using spectrum from its Nextel holdings. While Nextel customers have been fleeing steadily for years (as Sprint has planned for a while to phase out the brand), not all of those customers are coming back to Sprint. The brand and all associated technologies will die off by mid-2013, so perhaps Sprint may be able to get a boost both in spectrum and resources by that time, but it's too early to tell if that will be enough to satisfy consumers' growing LTE demands.

This also supposes Sprint can hold out that long.  While Sprint desperately needs Nextel resources, it needs Nextel customers even more. In the Q1, Sprint reported an operating loss of $863m. No small sum, by any stretch, but even more difficult to stomach when you consider how much debt Sprint has. With over $22b in gross debt, Sprint isn't exactly swimming in cash.

Moreover, the company is contractually obligated to sell $15.5bn in iPhones per year to comply with its agreement with Apple or face penalties. The trouble is, even if Sprint succeeds in selling enough iPhones to meet its contractual obligations, it only makes it that much harder to keep the network clear enough to maintain usable data speeds for its customers.

The company is walking a very thin line right now, and could even face bankruptcy in the near future if it doesn't play its cards right. Or the company might come out on top with a fancy new LTE network and unlimited data. The company is certainly fighting tooth and nail to maintain this headlining feature. While the popular cynical opinion is that Sprint will fall in line with the big dogs and institute tiered data plans in good time, the sheer number of other features and programs Sprint has cut, as well as its current tenuous financial position, indicate that Sprint is willing to do whatever it takes to hold on to its most alluring, signature feature.

The company doesn't really have any other choice.

Source: WSJ

Eric Ravenscraft
Eric is a snarky technophile with a taste for the unusual. When he's not obsessing about Android, you can usually find him obsessing about movies, psychology, or the perfect energy drink. Eric weaves his own special blend of snark, satire, and comedy into all his articles.

  • triangle8

    The analysis in the WSJ article is pretty superficial. Sprint will be fine. It will have more spectrum freed up from shutting down iden in 2013 and then have access to Clearwire's LTE network, also in 2013. The WSJ article is just scaremongering because Sprint's stock has been on a tear as of late.

    What the article doesn't mention is the proportion of subscribers to spectrum, which would put AT&T in a far worse position. In addition, Verizon may have spent billions on LTE and have a great network, yet it only has 12% of its subscribers on LTE as of 6/30/12. Sprint will have time to grow its LTE network and add subscribers without burning through all of its capacity.

    Sprint has a huge amount of cash of its balance sheet and plenty of time to grow its profits, which will grow substantially after shutting down iden.

    • John O’Connor

      I completely agree. WSJ is scaremongering as usual.

      What many people fail to realize as well is that Sprint Markets are much larger (covering more area per market) than VZ or AT&T. Sprint has 97 markets total whereas competitors breakdown their markets into smaller areas or clusters of a few towns or cities.

      Also misleading is the Apple obligation. Sprint is obligated to sell 15.5billion in iProducts over the course of 4 years, not $15.5/year. It seems the fact checkers were out to lunch on most if not all of the article.

      Sprint may not seem as cash positive as its competitors, but they also have massive amounts of longterm debt (much more than Sprints 22B) as well. It is the nature of the beast.

    • drksilenc

      not only this but clearwire is converting all there towers to dualmode lte wimax deploys so they will have that spectrum as well.

  • DamnApple
  • http://www.facebook.com/archercc Ryan Stewart

    Sprint has planned for this. Its obvious in their LTE roll-out. Just lie about coverage and performance, its much eaiser/cheaper than actually delivering. Compare Sprint's LTE coverage maps to reality (on s4gru) and you will see that Sprint just declared those markets live while only turning on (and limiting the connections to) a few towers in each market. And many of them are in the periphery, not in the concentrated areas. Sprint is calling MAYBE 20% coverate as "live."
    Look at Atlanta, for example. They claim the whole city is covered but the only place you can reliably get anything is Marietta and Catersville.

  • jaysoneric8

    I have a feeling Sprint will pull through. However there isn't a day that goes by where the thought of Sprint going bankrupt doesn't cross my mind. I think Sprint can pull though if they play their cards right just like the article said. My contract is up in 2014 hopefully Sprint has their stuff together by then because I have no intention of switching carriers. I'm hoping that network vision is successful so we can have faster 3g speeds among the other goodies network vision provides, and that they have a quick lte rollout on the 1900mhz spectrum this year - next year and a speedy rollout on the 800mhz next year - 2014. Also, Sprint talked about HD calling which I find pretty cool. Correct me if I'm wrong but I guess Sprints HD calling is similar to Volte. If they stick to their word and team up with Clearwire to produce a td-lte or an lte advance network while still providing all of the above including unlimited data Sprint will for sure pull through.

  • http://twitter.com/jglodek Jakub Glodek

    Great Article Eric, but I tend to agree with the other comments in that this Article paints a much worse picture than what Sprint is expected to have. I would not buy their stock as I believe that they still have a chance to fail, but they have been aggressively trying to break out of their losses. They will be fine, at least for the next few years.

  • aiden9

    Great tool for Sprint then. Next spectrum auction that comes up "We're in dire need of spectrum while Verizon already has tons of it, see even the WSJ says so! Ban Verizon from the auction!"

  • Sprint

    we (Sprint) have alot more in Iden networks which consist of the 800mhz frequency... we are also not worried at all about spectrum... the only problem is it's being used by IDEN.

  • http://twitter.com/ro1224 Robert Oliveira

    Hoping Sprint gets its act together. Its 3G has been absolute shit lately. I've agreed to hang on with the use of a free Airave access point, but when I'm away from home I may as well just use my Galaxy Nexus as a $199 paperweight. If it weren't for their customer service, I'd probably already be switched to another carrier.