Sprint is making headlines left and right. Over the weekend, the company announced that it would not participate in the incentive auction scheduled for March 2016. Citing that its spectrum holdings are “sufficient to provide its current and future customers great network coverage,” this move will save the company millions of dollars but might not be a good plan for the future. Jonathan Schildkraut of Evercore ISI estimated that Sprint has roughly 171 MHz of spectrum, comprised of 14 MHz of 800 MHz spectrum, 37 MHz of PCS spectrum, and 120 MHz of 2.5GHz spectrum. While Sprint certainly has a lot of spectrum, the airwaves being auctioned off in March are considered the crème de la crème of spectrum, often referred to as “beach-front property.” Even with Sprint’s announcement it’s unlikely that T-Mobile, Verizon or AT&T will drop out of the bidding.
The Wall Street Journal reported that an FCC official said on Sunday that the agency wasn’t surprised Sprint decided not to participate, given the public hints it has made in the past few months, and pointed out that the last two major auctions were a success even though Sprint wasn’t involved. Schildkraut noted that while this is a good sign because Sprint will be focusing on their network improvements in the near term, this lack of participation could underscore free cash flow (FCF) problems. “While we agree that Sprint does have a deep spectrum position, the lack of participation could also be evidence of FCF concerns. We have highlighted these concerns in the past (1) not using traditional network vendors or tower companies for deployment of its [next-generation network] (2) arranging two off-balance sheet financing companies, and (3) using 2.5GHz spectrum for backhaul,” Schildkraut explained. The firm believes these moves illustrate Sprint’s shaky FCF position.
Reader Interactions