Sprint to Sit Out Next U.S. Auction of Airwaves
September 27 2015 - 9:40PM
Dow Jones News
Sprint Corp. said it plans to sit out a coming auction of
wireless airwaves, a decision that will save the carrier billions
of dollars but could deprive its network of upgrades in the
future.
The Federal Communications Commission has scheduled a major
auction for March 2016. The U.S. government plans to buy airwaves
from TV broadcasters that it will then resell to wireless
carriers.
Sprint said on Saturday that its airwaves at present are
"sufficient to provide its current and future customers great
network coverage." The U.S. wireless carrier is about to commence
on another major network overhaul it says will sharply improve data
speeds.
The airwaves to be auctioned are considered as premium
"beach-front property" because they are situated at lower
frequencies. Low-frequency airwaves travel farther and penetrate
buildings better than airwaves at higher frequencies, meaning
carriers can cover larger areas using fewer cell towers. The
airwaves are necessary to meet exploding consumer demand to stream
videos and browse the Web on smartphones.
Sprint's decision not to participate removes a major player from
an auction that is the centerpiece of FCC Chairman Tom Wheeler's
tenure. T-Mobile US Inc., Verizon Communications Inc. and AT&T
Inc. are unlikely to drop out of the bidding. The auction will be a
success only if carriers are willing to pay enough money to
encourage TV broadcasters to part with their airwaves, or
spectrum.
An FCC official said on Sunday that the agency wasn't surprised
Sprint decided not to participate given the public hints it has
made in the past few months, and pointed out that the last two
major auctions were a success even though Sprint wasn't
involved.
The FCC plans to set aside a chunk of airwaves in the auction
that only companies without much low-frequency spectrum, like
Sprint and T-Mobile, can bid on. Sprint's decision to bow out means
T-Mobile may have an easier route to winning those airwaves unless
other bidders, like technology or cable companies, decide to
participate. There is much speculation tech or cable companies
could buy spectrum to build their own wireless offerings.
Sprint has one of the deepest troves of spectrum, in the
industry, but the vast majority of it is situated at higher
frequencies. That means Sprint must install more cell antennas to
equal the same coverage as AT&T and Verizon, which have far
more low-frequency spectrum. Sprint obtained a large swath of its
higher frequency airwaves when it acquired wireless Internet
provider Clearwire Corp. in 2013.
Underlying Sprint's decision to stay out of the next auction
could be financial trouble. The carrier hasn't turned an annual
profit since 2007, and it burned through $2.2 billion in cash in
the latest quarter. It plans to set up off-balance sheet companies
with the backing of parent company SoftBank Group Corp. to finance
phones and network equipment. It also has said it doesn't have
plans to tap debt or equity markets.
Earlier this month, Moody's downgraded Sprint's credit rating
two notches, to B3, saying it lacked confidence in the company's
turnaround plan.
A Sprint spokesman said on Saturday that the carrier is
"prioritizing its financial resources to improve our network
coverage, capacity, speed and reliability now and over the next few
years—and we already have the spectrum we need to do so. That is
more important for Sprint and its customers than investing in
[this] spectrum that won't benefit our subscribers until 2020 at
the earliest." After the coming auction, it will take several years
for the new spectrum to be fully available to the carriers.
Sprint has struggled with its network for roughly a decade, ever
since a disastrous 2005 merger with Nextel. Following that deal,
Sprint drastically cut back network spending to keep the company
solvent. In 2011, it began a four-year effort to overhaul its
network, which was made more difficult by the years of
underinvestment.
That work is starting to pay off, however. The carrier has seen
dramatic improvements in call quality and data speeds in the past
year, according to independent network analytics firm
RootMetrics.
Sprint hasn't participated in a major government auction in at
least a decade. It sat out the most recent auction, which ended in
January and raised a record of roughly $45 billion. The company
also didn't participate in 2008, the last time the government
auctioned low-frequency airwaves.
Write to Ryan Knutson at ryan.knutson@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 27, 2015 21:25 ET (01:25 GMT)
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