September 10, 2014 — With the inking of LTE agreements with 15 additional rural and regional network carriers, Sprint has now grown its Rural Roaming Preferred Provider program to includes 27 carriers, which will extend LTE coverage in 27 states, covering 565,000 square miles and a population of more than 38 million people.
On Tuesday’s Tower and Small Cell Summit panel, “What Fighting the Duopoly means to Rural Tower Development,” panelists discussed the impact of those agreements on providers of wireless infrastructure.
Todd Rowley, vice president, business development at Sprint, said the goal of the carrier’s rural coverage strategy is focus on creating wireless partners in rural areas to facilitate the creation of a nationwide footprint for Sprint customers. The agreements require each carrier to build out all of its coverage with LTE within 12 to 24 months.
“It has really worked to increase our LTE build out outside our coverage areas. We are looking to continue that effort and accelerate builds in other areas of the country,” he said. “We are looking [to sign rural agreements] that cover 3 million square miles to complement our footprint over the next year and a half.”
Illinois Valley Cellular, which operates 90 miles southwest of Chicago, has a roaming agreement with Sprint, which is facilitating its LTE build out. Bobby Kaminski, senior director product development, oversees the LTE build out for Illinois Valley Cellular, did everything but hug and high five Rowley, who sat next to him on the dais.
“It is a tough market to operate in as a small rural carrier, being so close to Chicago,” Kaminski said. “I want to shake Sprint’s hand and thank them for the infrastructure discounts that we are seeing. It’s tremendous. I mean, we are seeing Tier One pricing. I compared it with Ericsson and thought it couldn’t be right. Look at all the services!”
IVC is able to keep up with Sprint’s network software downloads. Now, IVC’s core is updated the same time as Sprint’s core.
“It was a real eye opener for us as a small carrier. It allows us to compete on the infrastructure side with the duopoly to have a great network,” Kaminski said.
The Rural Roaming Preferred Provider program gives smaller carriers a to high-speed mobile broadband solutions by providing the carriers with low-cost access to Sprint’s nationwide 4G LTE network and an opportunity to access an expanded range of mobile devices. In addition to reducing roaming costs for carriers and improving competition, the Rural Roaming Preferred Provider program broadens Sprint’s coverage footprint by giving its customers the ability to roam on participating carriers’ networks.
NetAmerica Alliance, which began in 2012, has launched a program with Sprint called the Small Market Alliance for Rural Transformation (SMART), which provides participating rural carriers the capabilities they need to build and run 4G LTE mobile networks. Using a federated cooperation model, NetAmerica hosts the 4G core and provides marketing support, program management, resource partners, services development.
“Rural markets lack scale. There are a precious few people in a large geographic area, which as historically been an uneconomic market to serve. It has been bolstered in the past by government programs, but those are going away,” said Chuck Harris, alliance development, NetAmerica. “We knew that rural carriers would need to make a bold move into 4G and we wanted to find a way to create that scale that would provide a business model for LTE build out.”
August 6, 2014 — The news surrounding the cellular industry’s third and fourth largest carriers has hit a fever pitch in the last 24 hours. Most recently, Sprint replaced Dan Hesse with Marcelo Claure as the company’s president and CEO. At the same board meeting, Sprint directors voted to end their $32 billion offer to buy T-Mobile, according a report in the Wall Street Journal.
Regulators have been making very clear from the beginning that they did not believe a merger of the number three and four carriers would not improve the competitiveness of the market.
The FCC’s displeasure with the prospect of a Sprint/T-Mo combo has been long suspected as it recently changed its spectrum holdings rules, which would have forced Sprint to divest its 2.5 GHz spectrum if it coupled with T-Mobile.
Additionally, the FCC is circulating a proposal to revise spectrum bidding credits to encourage the entrance of small businesses into the wireless carrier business, which notes the FCC’s desire to push beyond the current four major carriers, let alone collapse back to three.
Claure, 43, joined the Sprint Board of Directors in January and is the founder and CEO of Brightstar, a subsidiary of SoftBank.
“As president and CEO, Claure’s first priority will be to continue the build out of Sprint’s network by leveraging its strong spectrum holdings as well as ensuring that Sprint always maintains truly competitive offers in the marketplace,” the company said in a press release.
Hesse has served as Sprint’s head since December 2007, and led the company through a series of acquisitions, including the merger with SoftBank, and a multi-year overhaul of its nationwide network, known as Network Vision, including the shutdown of the Nextel network.
Even with the turmoil at Sprint, Jennifer M. Fritzsche, Wells Fargo senior analyst, expressed optimism that the carrier will turn a corner with the completion of the Network Vision build out and deployment at 2.5 GHz.
“Recall while S only has a 5×5 channel today, with the light up of the 2.5 GHz spectrum it will have multiple 20×20 channels and a spectrum position that would be significantly deeper than many of its peers,” she wrote.
Don’t Forget Iliad
Perhaps a bit lost in yesterday’s titanic announcements, T-Mobile rejected the $15 billion, or $33 a share, bid by cheeky French concern Iliad, according to the Wall Street Journal, refusing to open its books to them. The bid was rumored to be too low and cost synergies of the merger exaggerated. The only upside of the deal appeared to be the fact that it would not raise the ire of antitrust authorities.
Iliad’s odyssey may not be over. Reuters reports that the firm, which controls 13 percent of the French market with a low-cost service, will most likely come back with a sweetened deal.
July 31, 2014 — Sprint is no longer the only suitor for T-Mobile. A French wireless firm, Iliad, made a $15 billion in cash for 56.6 percent of the carrier, which works out to $33 per share.
Iliad values the remaining 43.4 percent of T-Mobile at $40.5 per share on the basis of $10 billion of synergies to the benefit of the T-Mobil shareholders, which works out to an overall value of $36.2 per share, a premium of 42 percent compared with T-Mobile’s share price of $25.41.
“The U.S. mobile market is large and attractive. T-Mobile has successfully established a disruptive position, which in many ways, is similar to the one Iliad has built in France,” according to an Iliad press release.
The cash portion would be financed via a combination of debt and equity. Iliad has the support of leading international banks for the acquisition debt, according to Iliad. The equity portion would be approximately €2 billion, and Xavier Niel, founder and majority shareholder of Iliad, would participate in the capital increase.
Iliad was founded in 1999 as a provider of low-cost wireless and today offers 2G, 3G and 4G broadband wireless service. The carrier had 3G coverage of 60 percent of the French population at the end of 2013. It launched 4G service in December 2013 and had 1,115 sites online as of March 2014. It has plans to deploy up to 10,000 more towers to cover 90 percent of the population. Iliad made an informal bid to purchase Bouygues Telecom last spring, which is reportedly faltering.
Iliad’s offer comes during a critical period as Sprint continues to pursue its $32 billion offer for T-Mobile. The deal is far from a sure thing, needing approval from regulators and government antitrust lawyers. But it looks more possible that and a T-Mo/Iliad hookup. Analysts question whether Iliad could raise the cash for the purchase and whether T-Mobile owner Deutsche Bank is even interest in the sale.
Sprint is driving along the edge by offering up a Wi-Fi-focused mobile connectivity plan. Sprint’s
USA brand, Virgin Mobile. The new entry-level, voice/messaging-only rate plan that breaks from the brand’s traditional focus on cellular data access.
This non-traditional plan features unlimited domestic voice calling and messaging, with no stipulation for cellular data services. Instead, the offering pushes consumers to access data using Wi-Fi connectivity. There are some gotchas though. The plan, which will be available to new customers through September 2is tied to a handful of select devices, including three that are LTE-equipped.
By J. Sharpe Smith —
Even as a Sprint/T-Mobile merger appears more likely, the Spectrum Screen Order released by the FCC this week may cast some more doubt on the regulatory approval fortunes of the transaction.
The proceeding expounds on how competition between service providers is important to the pricing of service, technology innovation and infrastructure investment. Specifically, the FCC updated the spectrum screen that it uses in its competitive review of secondary market spectrum acquisitions to reflect the suitability and availability of spectrum.
“As expected the FCC changed the denominator calculation of the spectrum screen (and what bands are included in it) as well as offered some subtle (but seemingly very purposeful) language about the future M&A activity in the industry and how it would be evaluated in terms of spectrum ownership,” Jennifer Fritzsche, senior analyst, Wells Fargo, wrote in a published Equity Research note.
This new denominator is 446.5 megahertz of spectrum, which includes 90 megahertz of AWS-1, 40 megahertz of AWS-4, 10 megahertz of H Block; and 156.5 (of the 194) megahertz of spectrum in the 2.5 GHz band. The higher amount of 2.5 GHz spectrum is significant because it represents a 3X increase over the previous denominator, which was 55 megahertz. Why is 2.5 GHz spectrum so important? Sprint would have to divest its vast holdings of 2.5 GHz spectrum in order to couple with T-Mobile, and Verizon Wireless is the obvious buyer.
“We note this was something Verizon Wireless was especially passionate about getting included in this screen calculation — as it represents a real asset for Sprint,” Fritsche wrote.
The FCC created a spectrum reserve provision for the 600 MHz band and then stated it would revisit that decision if there are “significant changes in the marketplace structure affecting the top four nationwide providers and their spectrum holdings.”
“We believe this language is very purposeful and could signal the FCC’s displeasure with the possibility of a Sprint/T-Mobile merger,” Fritzsche wrote. “According to our regulatory legal experts, this language could indicate that if this transaction is filed, the FCC will disallow Sprint, T-Mobile, or both from bidding on the 600 MHz band spectrum reserved for all bidders except AT&T and Verizon Wireless.”
J. Sharpe Smith is senior editor, AGL Link.