Sprint could sell some spectrum, but is that answer to financial woes?

Last month Sprint revealed that the company had burned through $914 million in cash during the first quarter as part of its efforts to gain new subscribers. While more consumers are making the switch to Sprint, the financial results are unsustainable over the long haul with analysts projecting another $4.5 billion in cash to be used the rest of this year. In February, Sprint CEO Marcelo Claure indicated he was open to selling some of Sprint’s 2.5 GHz spectrum. Analysts are now saying that even that move would not have a major impact on the company’s position.

According to analyst Craig Moffett with MoffettNathanson, there are several problems with a possible spectrum sale by Sprint. He notes that Sprint is in desperate need of a better network, including low band spectrum, and they need to reprice their base. Those moves each would require a huge infusion of cash and Sprint needs to pursue all three. At the present burn rate, even selling a quarter of their spectrum would not be enough to fund the cash burn rate and Moffett notes the bigger question is whether Sprint can reverse the burn rate. Finally, against all these issues is the fact that the value of 2.5 GHz spectrum is declining and it may be tough for Sprint to even find a buyer.

Part of Sprint’s challenge in finding a buyer, even if they decided to let go of some spectrum, is the less than stellar performance of the 2.5 GHz spectrum. As Sprint has discovered, there are a lot of hurdles, especially in dense urban centers, to a successful deployment. With all of the physical impediments to the spectrum, like buildings, Sprint has resorted to using a variety of patches like metrocell, microcell and femtocell repeaters. Sprint is also being challenged by the rise of Wi-Fi networks that are increasingly covering urban areas and reducing the need for wireless coverage.

By looking at some recent spectrum auctions, Moffett has concluded Sprint’s entire 2.5 GHz spectrum is worth about $20.9 billion, so a quarter of it would cover just a little more than one year’s worth of cash burn. Moffett also notes that Sprint is believed to be working on $10 billion of spending on 600 MHz spectrum at the same time it is dealing with these other issues.

source: Fierce Wireless

Come comment on this article: Sprint could sell some spectrum, but is that answer to financial woes?