US wireless carrier Sprint is reportedly planning a major overhaul of its network that could lead to US$1bn in savings – news which has spooked investors and analysts.
US wireless carrier Sprint (NYSE:S) is reportedly planning a major overhaul of its network that could lead to US$1bn in savings – news which has spooked investors and analysts.
Sprint intends to move its radio equipment from towers it has leased from Crown Castle (NYSE:CCI) and American Tower (NYSE:AMT) to less costly government-owned sites, Re/code cited sources familiar saying. The process could get underway as early as June or July.
The operator is reportedly also looking to reduce its reliance on larger rivals AT&T and Verizon’s backhaul fibre optic networks by switching to microwave backhaul technology.
Sprint’s shares were down 10.03% at market close on Friday on the back of the news, while those of majority shareholder, Japanese telco Softbank, plummeted 7.9% today to Y5,111 – their lowest level since June 2013.
Wells Fargo analyst Jennifer Fritzsche questioned the news in an investor note, pointing out that Sprint has multi-year contracts in place with Crown Castle and American Tower, as well as with SBA Communications (NASDAQ:SBAC). The carrier has between six and seven years left on its agreement with Crown Castle and five years remaining on its deal with American Tower, she noted.
Fritzsche said the reported network overhaul fits with Sprint executives’ previously stated goals, which include prioritising cost cutting and disrupting the towerco leasing model. However, she described it as “not for the faint of heart”.
“Sprint needs to be solely focused on avoiding mistakes of the past, where network overhauls caused major disruptions. We believe this network improvement should help with the brand repair (which some would suggest is Sprint’s biggest problem).”
She added that it would be a major step backward for the company if its network quality and customer service were to suffer as a result of the shifts.
Sprint has said the company, which reported an operating loss of US$2m and net loss of US$585m for Q2 2015, aims to cut its run rate operating expenses by at least US$2bn in the 2016 fiscal year.
In late September last year, Sprint announced that it would sit out the upcoming broadcast spectrum auction – the only one of the big four carriers to do so.
At the time, CEO Marcelo Claure (pictured) said the company’s focus must be on improving its network and market position in the immediate term so we can remain a powerful force in fostering competition, consumer benefits and innovation in the wireless broadband world”.
Both Sprint and T-Mobile have struggled to compete with heavyweights AT&T and Verizon, and have often been tipped as takeover targets.
Claure and T-Mobile CFO Braxton Carter have both indicated that they see fixed/mobile convergence as driving future M&A deals.
Hires six new presidents
Meanwhile, Sprint has announced the appointments of six new regional presidents as part of its new corporate structure.
Johan Chung will take on the role for Northern California and Nevada; Jim Mills for Illinois and Wisconsin; Glen Flowers for Michigan, Kentucky and Indiana; Conrad Hunter for New England; Greg Post for Mountain and Southwest; and Karen Paletta for New York, New Jersey, Central Pennsylvania and Delaware.
Sprint announced late last year that it plans to restructure the company into four geographic areas – West, Central, Northeast and South – with presidents looking after its 17 top regions.
