Sprint: Dazed & Confused
I listened to the webcast of Sprint CEO, Gary Forsee, speaking at the Communacopia Networking Fest in New York today primarily to understand the logic behind the SpectrumCo placing winning bids of US$2.4bn in the AWS auction of which Sprint owns 5%. This is despite the raison d’etre of the Sprint/Nextel merger being that they owned a huge 90MHz of spectrum in the 2.5GHz band in 85 of the top 100 USA markets to launch future 4G wireless services.
Gary Forsee said that Sprint was comfortable with its positioning with the business sector: Sprint’s IP/MPLS fibre backbone coupled with iDEN & CDMA wireless, he believed was a compelling offer now and in the future - presumably with 4G services.
However, there was a problem in the consumer sector and Sprint saw the need to offer something together the cable companies. They therefore cut a deal with Comcast, Time Warner, Cox and BrightHouse. Sprint’s portfolio of rural telephony providers was bundled together and spun-off presumably they were seen as a competitor to the cable companies and although a nice earner problematic with the long term vision.
According to Gary Forsee, it has taken approximately a year, which is much longer than expected, to get the functionality associated with the cable companies working: the cable companies will manage the customer interface and have their branding on the phones. In my planet this sounds a lot like a simple MVNO deal: except it is not public knowledge the level of commitment by the cable companies to buy capacity or share start-up expenses.
During all this time the cable companies had been involved in the 4G technology and business case discussions. According to Forsee, Sprint offered the Cable Companies the opportunity to use the 4G at current MVNO pricing or even buy-in to the business case at cost. It seems to that the Cable Companies took the decision to buy spectrum and potentially build their own local wireless networks. This must have been a huge body blow to Sprint and the type of reversal in fortune that needs heads to roll.
The Sprint 5% investment in SpectrumCo was to paraphrase Gary Forsee “tag-along and reinforce that doing things together would be an important market place decision”
Some people are immediately going to interpret that the cable companies do not believe in the 4G Wimax solution proposed by Intel, Motorola and Samsung and that is probably fair in the marketing hype that is starting to fly around on the 4G battlefield.
My personal interpretation from the other side of the pond is that the cable companies really want to own Sprint as a long term asset fighting against the Verizon and AT&T networks. Even if the cable companies believed in the 4G technology decision, it is probably beneficial to see current Sprint shareholders to bear the brunt of the cost of the Sprint, Nextel and Affiliates consolidation and more importantly the cost of launching a new technology before the cable companies step in and buy Sprint on the cheap. According to the master of ceremonies from Goldman Sachs, Sprint is currently valued upon zero growth: given the troubles they face this is probably fair, however the Cable Companies presumably want an even better bargain.
In my opinion, given that the Sprint market capitalization is US$52bn: a mere US$2.4bn investment in spectrum should be seen as only a down payment on the final goal and a valid punt to keep the price reasonable.
Gary Forsee said that Sprint was comfortable with its positioning with the business sector: Sprint’s IP/MPLS fibre backbone coupled with iDEN & CDMA wireless, he believed was a compelling offer now and in the future - presumably with 4G services.
However, there was a problem in the consumer sector and Sprint saw the need to offer something together the cable companies. They therefore cut a deal with Comcast, Time Warner, Cox and BrightHouse. Sprint’s portfolio of rural telephony providers was bundled together and spun-off presumably they were seen as a competitor to the cable companies and although a nice earner problematic with the long term vision.
According to Gary Forsee, it has taken approximately a year, which is much longer than expected, to get the functionality associated with the cable companies working: the cable companies will manage the customer interface and have their branding on the phones. In my planet this sounds a lot like a simple MVNO deal: except it is not public knowledge the level of commitment by the cable companies to buy capacity or share start-up expenses.
During all this time the cable companies had been involved in the 4G technology and business case discussions. According to Forsee, Sprint offered the Cable Companies the opportunity to use the 4G at current MVNO pricing or even buy-in to the business case at cost. It seems to that the Cable Companies took the decision to buy spectrum and potentially build their own local wireless networks. This must have been a huge body blow to Sprint and the type of reversal in fortune that needs heads to roll.
The Sprint 5% investment in SpectrumCo was to paraphrase Gary Forsee “tag-along and reinforce that doing things together would be an important market place decision”
Some people are immediately going to interpret that the cable companies do not believe in the 4G Wimax solution proposed by Intel, Motorola and Samsung and that is probably fair in the marketing hype that is starting to fly around on the 4G battlefield.
My personal interpretation from the other side of the pond is that the cable companies really want to own Sprint as a long term asset fighting against the Verizon and AT&T networks. Even if the cable companies believed in the 4G technology decision, it is probably beneficial to see current Sprint shareholders to bear the brunt of the cost of the Sprint, Nextel and Affiliates consolidation and more importantly the cost of launching a new technology before the cable companies step in and buy Sprint on the cheap. According to the master of ceremonies from Goldman Sachs, Sprint is currently valued upon zero growth: given the troubles they face this is probably fair, however the Cable Companies presumably want an even better bargain.
In my opinion, given that the Sprint market capitalization is US$52bn: a mere US$2.4bn investment in spectrum should be seen as only a down payment on the final goal and a valid punt to keep the price reasonable.
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