The FCC approved the use of 800 MHz spectrum to provide advanced 3G and 4G services last week.  This paves the way for Sprint (NYSE:S) to offer LTE services on the same spectrum that houses its iDEN network currently. Before the FCC voted to remove the restrictions on the 800 MHz band, the spectrum could be used only for operating 2G services.
The approval comes at a time when the wireless industry is spectrum crunched and will therefore go a long way in meeting Sprint’s LTE needs as it aggressively builds its 4G network to make up for the huge gap in LTE coverage between itself and rivals Verizon (NYSE:VZ) and AT&T (NYSE:T). It also gives Sprint more room to breathe after having extended its unlimited plans for 3G to LTE as well.
- How Did U.S. Wireless Stocks React To Brexit?
- Explaining The Recent Sprint Rally
- How Leveraged Are U.S. Wireless Carriers?
- Why Do U.S. Consumers Pay Significantly More For Wireless Services?
- Why Is T-Mobile’s Valuation Per Subscriber Ahead Of Sprint’s?
- What Has Driven Sprint’s Recent Margin Expansion?
Sprint’s lagging LTE plans get boost
Sprint expects to launch its LTE network in ten cities by the mid-year and has announced only six of those initial markets. In comparison, Verizon has its LTE network up and running in about 196 markets across the U.S. and covers about 200 million Americans currently. AT&T is behind Verizon in terms of LTE coverage but it still covers about 75 million Americans and plans to add an equal number by the year-end.
In order to bridge the gap, Sprint is aggressively executing on what it calls its Network Vision plans to get most of its LTE network ready by the end of 2013. At the same time, the carrier is gradually phasing out its iDEN network after having suffered years of subscriber losses on the platform that it had acquired in 2005. In fact, Sprint has announced that it is planning to quicken the process and shut down the iDEN network completely by next summer.  The freed up iDEN spectrum will then be used to boost its LTE network in 2014.
Buys unlimited plans some more time
Moreover, Sprint has pledged to keep its plans for LTE unlimited even as Verizon and AT&T are making moves to eliminate their unlimited plans completely and offer tiered data share plans in their place. (see Sprint Promotes Unlimited Plans As Verizon, AT&T Move To Shared-Data Plans) Since unlimited plans on a higher speed network can clog up the network and lead to performance issues, Sprint may eventually have to move away from these plans as data-hungry smartphones such as the iPhone run amok. The carrier will therefore be hoping to have huge swathes of free iDEN spectrum ready to be employed to increase LTE capacity by the time its LTE network sees that kind of adoption.
Since 4G speeds are much higher than 3G, 4G users will tend to exceed their monthly quota pretty easily on a monthly subscription plan. Having the option of an unlimited plan will therefore hold greater value to subscribers on LTE than they did on 3G. Extending the unlimited offer to LTE may therefore help Sprint ween a few subscribers away from rival carriers long enough so as to absorb them when its own LTE network is ready but without sufficient coverage and a competitive LTE network it could get tougher for Sprint to compete with the bigger duo. Having placed a huge bet on the iPhone, whose next-generation version will most likely sport LTE, Sprint needs to come good on its LTE plans. (see Sprint’s LTE Plans Are Coming Up Short As iPhone 5 Approaches)Notes:
- FCC approves Use of LTE in 800MHz Band, Opening Door For Sprint, May 25th, 2012 [↩]
- Sprint to cease service on its iDEN network as early as June 30, 2013, Sprint Newsroom, May 29th, 2012 [↩]