Sprint's ability to afford an LTE 4G iPhone called into question

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Bernstein Research analyst Craig Moffett downgraded his rating on Sprint stock to underperform, along with a note that says bankruptcy is a very real threat with the LTE iPhone looming.

We believe an LTE iPhone will likely be badly disadvantaged on Sprint’s network, potentially impairing sales … at a time when Sprint is subject to a punishing take-or-pay deal with Apple. The problem is 4G. Sprint doesn’t have enough free-and-clear spectrum on which to launch a competitive LTE network, and it doesn’t have the money to clear spectrum that’s already in use. ... To be clear, we are not predicting a Sprint bankruptcy. We are merely acknowledging that it is a very legitimate risk. And notwithstanding a recent rally in Sprint shares, we believe that risk is rising.

As you might recall, rumor has it that Sprint basically bet the farm on the iPhone 4S, but considering how much T-Mobile is hurting without it, who can blame them? Sprint's LTE rollout was supposed to be kicking off this year, but if their 4G network isn't reasonably matured by the time an LTE-capable iPhone is announced, they may be in trouble. One can only presume that most of the money AT&T forked over for the failed merger went to those kinds of network upgrades.

It's worth pointing out that while Sprint currently offers the CMDA iPhone 4S, they didn't get the new iPad last week like AT&T and Verizon did. Not on LTE. Not even on CDMA.

Anyone taking bets? Will Sprint be able to keep their network up to snuff for the LTE iPhone, or do AT&T and Verizon have too much of a head start?

Source: AllThingsD

Simon Sage

Editor-at-very-large at Mobile Nations, gamer, giant.

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Reader comments

Sprint's ability to afford an LTE 4G iPhone called into question

39 Comments

This is a legitimate concern for Sprint. Without a strong LTE network, it will be tough to compete against Verizon and AT&T.

sprint has legitimate concerns; the fact that no LTE iPad was announced in their network tells a big picture. The bigger crime remains, how is at$t continue to claim they have the largest 4G network? talk about false advertising with their mere 30 LTE markets

while WiMAX got them market first, it's amazing how much of a fail it was for them. So much wasted revenue and time lost to a failed tech.

Sprint had to use their 2.5Ghz spectrum(which was most of that band) in a four year time frame, and LTE was not ready, so Sprint went with WiMax.

Have you actually used Sprint's WiMax network? It absolutely blows. Not only is the signal spotty and full of holes, but the speeds are sloooow - frequently not much better than 3G.

An LTE iphone is probably a case of worse possible timing for Sprint. They probably can't realistically have their LTE network built out by this falls release and will be in even worse possible place then they are now. I'm sure Sprint was hoping LTE wouldn't come until next year. I assume that Apple won't completely leave them in the dark come iphone 5 release time. So most customers will be left with the choice of a CDMA Sprint version (even if that version includes Sprints brand of LTE, most of the country probably won't have access to the network) or a true 4g version from the other carriers.

agreed. but wasn't that really the case with the EVO when it launched. Most places didn't have wimax did they? Not sure but i didn't think so.
Interestingly, my towers are scheduled for data speed upgrades before the end of June. And i'm in LA. And i think that's to switch the tower to the new system. Don't know if that means it will eventually be LTE ready. As i know LTE launches in the midwest first and i surely don't expect it in LA by June. But it could be laying the foundation for their testing. Regardless i got a 4S and i'm likely not upgrading when the new one comes out anyways as i won't have an upgrade until i think some time in 2013.

you're rough. But don't you think that the effect the have on keeping costs down is worth them existing. If the and tmobile go away what's to stop AT&T and Verizon from jacking up prices even more. They are both about the same now. Sprint is the only real thing restraining them.

will sprint and t-mobile be 'too important to fail' and get taxpayer money (via our Federal govt)to survive?
let's hope not. no ill will to either company, they just need to take note of Ford's game plan to re-organize without taxpayer's hard earned tax dollars assistance.

That won't be happening. While Sprint and T-Mobile employ many American employees - the products being sold are manufactured overseas. The biggest part of the auto industry bailout is that they sell products (vehicles in this case) manufactured in the USA. Sorry, but I don't expect the government to bailout Sprint or T-Mobile. I would look for an even bigger Verizon and AT&T before a buyout would happen (post bankruptcy).

The auto industry "bailout" wasn't a taxpayer giveaway like so many misinformed people assume. It was a loan. That was payed back. To save two of the largest employers in the world. Now IF, the same thing were to happen to sprint, it would likely also be a loan. Only the banks recieved a bailout requiring no payback. But i highly doubt either sprint or tmobile will recieve any government assistance. Both networks simply need to find a way to get LTE rolling.

"One can only presume that most of the money AT&T forked over for the failed merger went to those kinds of network upgrades."
Who do you think AT&T's "failed merger" was with. Hint: it was not Sprint.

Sprint made the shortsighted gamble with WiMAX. It got them to "4g" first but it wasted billions of dollars and now a few bad decisions and partners later, they are really far behind.
I'm happy on my 4S and can't upgrade till fall of 2013 so I hope they can get a functioning LTE network up by then. Unfortunately I'm not sure if they will still be around at that point.

true but to be fair it also got them the EVO 4G which kept them in the game at all.
it was still a bad choice given where Verizon was going.

I'm in the same boat. No upgrade until October 2013. With Sprint consistently trading under $3 for the past two years, the only thing keeping them afloat is their affiliation with NASCAR. Once that contract is over, who knows?

Why so Far Hesse has been great for them. This is an analyst downgrade. It's not even an actual bad quarter let alone a string of them.

This is bad news. As a former Sprint customer, I really enjoyed my time with them. I was there in the dark ages of horrible customer service and coverage to the improved Sprint that really did clean up their act and coverage wasn't bad at all (for me). I went to AT&T for the iPhone 4 and thought maybe I would one day return to Sprint. I guess not considering the next iPhone will surely be LTE; something Sprint isn't prepared for. Personally, I'm fine with AT&T. My coverage is good everywhere I go and I never go over my 2GB limit (as in I don't need to monitor my own usage). Sprint has gotten themselves into a bit of a bind here for sure. We'll have to wait till the summer/fall release of the iPhone 5 (or "The New iPhone" lol) to see what may happen with Sprint.

I really don't think it's the end of the world or Sprint for that matter if they don't get the new iPhone. They'll have a decent LTE foot print by the end of the year.

Do you guys really thinks Dan Hesse is sitting around cry what to do, oh what to do? Sprint has a plan. I don't see them going Bankrupt anytime soon. If anything the 2 smaller companies should merge, but that would never happen.

Sprint put it's money on getting LTE service from LightSpeed - which had their approval for it's frequency that it was going to use revoked due to GPS interference. This is much like it is getting it's WiMax service from Clear. Now Sprint has to find an alternative to LightSpeed which means it has to either put up it's on LTE service or find another provider, or until LightSpeed can make the FCC/FAA/Military happy that it's interfering with GPS freq. I believe Sprint used an out in their LightSpeed contract to get out of it. Sprint at one time a major backer of Clear in exchanged for WiMax service (not sure if this is still the case), but Sprint didn't directly invest in WiMax.

Your comment is backwards. Sprint has directly invested millions into Clearwire. Almost to the point that they are close to owning 51% of the company. The benefit to Lightsquare was that they were going to pay Sprint to operate on Sprints spectrum so they didn't have to build their own spectrum.

they've got iden bandwidth to use, they have cash they were gonna spend on metro pcs to by bandwidth plus the EVO did fine on without a huge wimax network. If it's on the way sprint customers will probably tolerate a lot. They tolerate slow iphone data rates even at 10 bucks more which sucks.

oh and not to mention they have the money that was gonna go to lightsquared to now spend on more bandwidth if they need to.

that's just a $65 million break up fee. That's not that much and it's much less then they'd have paid to have the service which was way more then 65 million dollars. The money they won't be devoting to using lightsquared can be spent on other bandwidth if they can find it.

It's like if i have contract with you to paint my house for $2000 and there is a $100 cancellation fee. If i cancel yeah i'm out $100 but i still have $1900 to spend.

i just read this. the $65 mill is actually a repayment of money Sprint was advanced. So they got $65 up front. All they are doing is giving the money back since the deal won't continue. The other thing is they rated the deal at worth tens of billions and was for 15 years. so clearly they will have room in the budget to do an alternative. problem is if this was the cheaper alternative whatever the alternative is may be even more expensive.

I think sprint need to get in gear ASAP. When the next iPhone launches if it has lte on board and sprint doesn't get it, it could be detrimental.

This is the same noise that everyone was spouting when Sprint launched 3G 1st. Every analyst said Sprint was done. Sprint has a network vision plan that this guy didn't even talk about. What about the cities that Sprint is going live with LTE here in a few months, or the absolute guarantee that the entire network will be done at the end of 2013. No other carrier has laid out they're plans like Sprint has. Yes Wimax wasn't the best thing but the former CEO Gary Forsee already had that in the works, pulling out completely would have cost more money. Hesse is doing a great job and I see him pulling this off.