Sprint Eyes Spectrum Deal With Dish

by Trefis Team
+56.39%
Upside
4.16
Market
6.51
Trefis
S
Sprint
Rate   |   votes   |   Share

With spectrum getting more and more difficult to acquire and talks with potential partners falling through, Sprint’s (NYSE:S) spectrum options seem to be getting more limited by the day. But the third largest wireless carrier in the U.S. may still have one left – Dish Network (NASDAQ:DISH). While Sprint may not be able to buy the spectrum outright from Dish following the FCC’s recent moves which make it likely that the latter will secure approval to build out its own wireless network, Sprint can still look to partner with Dish and host its spectrum. [1] Sprint is looking for a replacement after its deal with Lightsquared met with an early demise after the FCC refused to give the latter approval to use its satellite spectrum for LTE.

Sprint needs additional spectrum in order to bolster its LTE plans, in which it is lagging behind both Verizon (NYSE:VZ) and AT&T (NYSE:T). Currently, Verizon has an LTE network that covers about 200 million Americans in 196 markets across the U.S. It also plans to add another 200 markets to cover about 260 million American citizens by the year end. In comparison, AT&T’s LTE network covers about 75 million Americans presently and the carrier plans to double the coverage by the year end. Meanwhile, Sprint has yet to announce its first LTE market.

See our complete analysis for Sprint

Sprint’s spectrum woes

In order to bridge the gap and build a network robust enough to compete with the leaders, Sprint will need all the spectrum it can get its hands on. At the same time, the burgeoning data needs of smartphone users such as the iPhone are putting a lot of strain on its 3G network, which needs additional spectrum for strengthening. While competitors have done away with unlimited data plans, Sprint is still keeping them in a bid to differentiate from rivals and that is adding to the strain.

The recent Congressional approval for wireless spectrum auctions has come as a welcome relief for the carrier. But it is subject to the FCC’s judgment how much TV spectrum behemoths AT&T and Verizon will be allowed to bid for in order to avoid anti-competitive concerns. (see Wireless Industry Cheers as Spectrum Auctions Seem Likely) Moreover, the biggest showstopper could be TV broadcasters’ reluctance to part with their spectrum, so Sprint cannot rely solely on the auctions either. Even if the two obstacles are somehow overcome, the auctions may not happen for another year or two.

In order to meet its spectrum needs, Sprint has tried to forge network sharing deals with T-Mobile and even looked into acquiring MetroPCS. But those talks either fell through or were vetoed by the board. Sprint had to end its Lightsquared deal after the startup failed to secure the requisite regulatory approvals.

How Dish may have an answer

In such a scenario, Dish’s spectrum could provide a potential solution for Sprint. Unfortunately for Sprint, however, it looks like Dish has wireless ambitions of its own. The company’s CEO has also gone on record saying that the spectrum was not up for sale and that he intends to use the spectrum to roll out Dish’s own wireless network, making it unlikely that it would want to sell the spectrum.

But if Dish were to look to set up its own wireless network, it would need to completely secure all regulatory approvals. This could take up to a year, by which time Verizon, AT&T and Sprint would have taken a considerable LTE lead over any new entrant.

Dish may therefore agree to partner with Sprint to roll out a joint wireless service. When Dish secures the regulatory approvals, it would have Sprint’s infrastructure in place to host its spectrum and Sprint would have the benefit of added spectrum. It could also help Sprint market its services to Dish’s current customers and grow its subscriber base, and vice versa. However, other potential suitors such as AT&T may also be lurking on the scene to partner with Dish, in which case Sprint may have a tough time negotiating favorable terms.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Sprint says Dish spectrum deal may be possible, Reuters, March 27th, 2012 []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!