Sprint's 4G Non-Strategy
Oct 11th 2011 3:34PM
Updated Oct 11th 2011 3:40PM
I'd like to say that if it wasn't for bad luck, Sprint Nextel (NYS: S) would have no luck at all. But you can't blame Sprint's woes just on luck. The company has made its own mess of things, the most infamous misstep being its merger with Nextel and its push-to-talk network. This turned out to be a synergistic nightmare: two non-compatible wireless technologies, Sprint's CTDM and Nextal's iDEN, pushed into a shotgun wedding. The progeny of this mismatched union was doomed from the beginning.
First choice is not always the best
But now we're in the era of "4G," that being the buzzword for fourth-generation wireless technology. To its credit, Sprint was quick to get into 4G. Unfortunately, it now seems to have jumped in too quickly, going with an early 4G technology known as WiMAX. This has proven to be the wrong choice because a considerably faster 4G technology known as LTE soon showed up.
Because the speedier LTE is the technology that Verizon (NYS: VZ) and AT&T (NYS: T) are using for their 4G networks, Sprint is faced with a problem: How is it going to also build out an LTE network while still providing WiMAX coverage for its current 4G subscribers?
Sometimes the second choice is not so hot either
True to form, Sprint made another questionable decision. It signed a 15-year agreement with LightSquared to provide it with an LTE network. The problem with this is that LightSquared's proposed network is mired in a controversy with the GPS industry. It claims that much of LightSquared's spectrum allegedly interferes with GPS signals and could potentially cause airplanes to crash.
Well, that's not good, and until those problems are worked out -- if at all -- Sprint's LTE plans with LightSquared are uncertain.
Maybe renting is better than buying
To compound the problem with Sprint's original 4G network choice, it fell into the trap of buying 54% of the company that provided it, Clearwire Communications (NAS: CLWR) , and now it's not sure what to do with it and its WiMAX network.
The problem is Clearwire says it needs $600 million to build an LTE network, money it doesn't have. Nor does it have the $150 million to $300 million needed to maintain and improve its existing WiMAX network. Last Friday, Sprint told investors and analysts that it will not provide any funding for Clearwire, so Clearwire is looking for it elsewhere. It's been talking to other telecoms, including AT&T, Verizon, MetroPCS (NAS: PCS) , and Leap Wireless (NAS: LEAP) . The relationship between Sprint and Clearwire is truly up in the air.
Clear as a pin (dropping in mud)
Sprint now has four networks: its existing 2G/3G networks which use a combination of CDMA and EV-DO, its push-to-talk iDEN network, and its 4G WiMAX network. And now it quickly needs to get one more, an LTE network, if it has any chance at all of become competitive again. But how it's going to do that is still as unclear as a conversation held via two tin cans and a piece of string.
The situation with Sprint and Clearwire keeps changing. My suggestion is to keep track of these companies by putting them in My Watchlist. Just click here.
At the time this article was published Fool contributor Dan Radovsky owns shares of AT&T. Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.