By Jennifer Fritzsche…
The drama surrounding Sprint was the biggest, and longest-running story of 2013: from Dish Network and Softbank bidding for Sprint to Dish bidding against Sprint for Clearwire. Sprint prevailed in both cases, and we now have a stronger, better capitalized Sprint, which helps make the case that it will spend more on its infrastructure in 2014 and beyond. Last July, they laid out a proxy for the capex outlook, which included $8 billion for 2013, $8 billion in 2014 and $6 billion in each of the following three years (2015 to 2017). Management is messaging that it wants to spend even faster, however. I think we might see an even bigger capex number than $8 billion for next year. With Clearwire’s spectrum, Sprint is deeper than the other carriers.
Dish has emerged as a private equity-funded spectrum aggregator and chief irritant of the industry. The big question is: What is Dish’s next move? I don’t think they are going to spend the money to build out the network. Dish’s announcement that it will jointly develop and deploy a fixed wireless broadband service with Sprint, on a trial basis in Corpus Christi, Texas, is a nod to Sprint for a possible spectrum-hosting relationship in the future. Charlie Ergen [Dish chairman] is not popular with federal regulators because he accumulates a lot of spectrum and doesn’t build out a network.
As we turn the calendar to next year, the high-end capital intensity of this market will continue to exist. Each of the four national carriers will be spending more in absolute dollars than they did last year.
Fritzsche’s Top Five for 2013
1. Sprint, Dish Network, Softbank melodrama
2. Verizon’s acquisition of Vodafone’s 45 percent interest in Verizon Wireless for $130 Billion
3. T-Mobile’s resurgence
4. Cell tower consolidation (AT&T/Crown, GTP/American)
5. Sprint’s promises that it will be at network parity in 2014
Jennifer Fritzsche is a Managing Director in the equity research department at Wells Fargo Securities, where she focuses on the telecommunications services sector. She started in telecom equity research in 1996 with EVEREN Securities. At EVEREN, she was promoted to Senior Analyst after serving two years as an Associate Analyst on the telecom research team. In 1999, She joined the First Union/Wachovia research platform following First Union’s acquisition of EVEREN. In 2000, she tied for second in the Best Up and Comers category in Institutional Investor’s annual vote. She was ranked eighth (of 60 firms) in the Reuters 2001 Survey of Fund Managers in the category of wireless telecom services and was selected as the top wireless analyst by Starmine, a leading provider of objective ratings of equity securities analysts.