sprint – strategy analysis by v1.0

Sprint – What Next?

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Business Review and Options for Technology & Strategy

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Contents

Contents

Slide 2: Sprint – A Wireless Service Provider That Needs A Plan

Slide 6: Sprint and The Basics Of Profit In Wireless

Slide 7: Overview of Sprint’s Wireless Network Design

Slide 9: Sprint – A Note on Frequency Holdings

Slide 12: Sprint – Analyzing the Data Service

Slide 17: Sprint – Analyzing the Voice Service

Slide 20: Sprint – Business Strategy – What Next?

Slide 23: Sprint – Change the Sales Strategy

Slide 27: Sprint – Change the Technology Strategy

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Sprint – A Wireless Service Provider That Needs A Plan

THE CASE ON SPRINT:

• Sprint is the fourth largest US wireless operator (59 mil subscribers) behind T-Mobile (63 mil), ATT (138 mil ) and Verizon (137 mil). T-Mobile recent jumped ahead of Sprint to third place and has been growing with million plus subscriber additions for the last several quarters.

• Softbank bought an 80% stake in Sprint back in 2013 when it paid around 7.5 dollars for each Sprint stock. Now the same Sprint stock is hovering around 4. Softbank’s huge investment has been cut in almost half.

• For Softbank and its Chairman Mr. Son, it appears that the Sprint turn around is more difficult now than in 2013 when the investment was first made with a view to merging Sprint with T-Mobile.

• Would Sprint inflict more damage on Softbank and suck in more billions in commitments or would it become the new “Vodafone Japan” success story for Softbank?

• Current vibes out of Sprint suggest that the new management has been working on cost cuts and monetizing its various assets. Is that all that needs to be done?

• What about Sprint’s network? Recently it had launched an ambition plan to deploy 80,000 cells and now it has made a big cut in its network investment budget. So is it “densifying” or is it not?

• At JNZNetworks, our team reviewed the technology and strategy options for Sprint and developed this update. Our focus has been more on the technology and overall strategy rather than financials for which extensive material is available on Bloomberg, Wall Street Journal, Reuters, CNBC etc.

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Sprint – What Next? A Strategy Analysis By JNZNetworks.com

ANALYSIS SUMMARY:

Sprint needs about 30 billion in funds and a clear alignment with one of possible application, software, media or content players to have a reasonable chance to compete with the big three ATT, Verizon and T-Mobile in the US wireless market.

Sprint’s wireless network has three main issues, lack of low band frequency spectrum versus its competitors use of the unpaired 2500 band that requires special phones with the LTE TDD technology variant poor network design with multiple layers of frequency and technology overlaps

Sprint needs growth and this can only come from a pricing war on high speed data plans. Sprint needs to offer big discounts versus competitors on LTE data and provide a clear marketing message.

Sprint’s network “densification” plan with 80,000 small cells is facing road blocks due to zoning and permit delays from various city councils. The plan will slow further as Sprint cuts its network expense for this year from 4.5 to 3 billion. This plan is more of a low cost coverage improvement effort rather than capacity enhancement due to increase in customer traffic.

The following analysis covers Sprint’s wireless network design, issues related to its voice and data service, comments on business options and suggestions for changes to the technology and business strategy.

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Sprint – A Technology and Strategy Analysis

ANALYSIS IN DETAIL

Disclaimer:• The opinions expressed in this report are based on the experience of our professionals who have worked

across the global wireless markets and all information used to shape our opinions is publicly available.

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Sprint and The Basics Of Profit In Wireless

THE BASICS:

• When we first looked at Sprint, we were surprised to learn that although Sprint makes more than 30 billion a year, it has been losing money for the last several years. How can that be?

• To understand this, we refer to the simple formula of wireless industry,There is Cost,

• Cost = (Cost of Building the Network) + (Cost of Operations) + (Cost of Airwaves)& there is Revenue,

• Revenue = (Number of Users) * (Average Revenue Per User)

So the Profits are straight forward, Profit = Revenue – Cost

• The math is simple. ATT and Verizon have more than 130 million subscribers each and Sprint has less than 60 million. To deploy and run a nationwide network, because Sprint does not have revenues like its bigger rivals, it does not have enough funds to invest for a competitive nationwide network of the same scale.

• Merger with T-Mobile was a good plan to reach scale but it reduces the US wireless market operators from four to three. The government will not let that happen. What now?

• In order to change its fortunes, Sprint needs cost cutting but more than that real revenue growth.

• Growth is exactly what T-Mobile has been focused on for the last several years. The deep pockets of its German parent have helped as well as its slick marketing campaigns and its product disruption.

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Sprint – Overview of Wireless Network Design

OVERVIEW OF SPRINT’S WIRELESS NETWORK DESIGN:• More than 90% of Sprint revenue comes from selling wireless services . • Sprint’s voice service runs on its CDMA voice network while the data service runs on multi-level CDMA

EVDO and multi band LTE data networks. Sprint uses two variation of the LTE technology which are TDD and FDD.

NO OTHER OPERATOR IN US USES TDD LTE TECHNOLOGY:• Sprint is the only operator using TDD LTE in US on the 2500 MHz unpaired frequency band. The 4G LTE

data technologies of Verizon, ATT and T-Mobile are quite similar and use the FDD type LTE.• Sprint’s wireless network is somewhat similar to the Verizon wireless network in that both use the 2G, 3G

technologies of CDMA, EVDO and have moved to 4G technology of LTE. • The T-Mobile network and the ATT network are more in common. Both have 2G, 3G, 4G technologies of

GSM, UMTS / HSPA and LTE and this combination is used in most countries around the world.

TDD TEQUIRES SPECIAL PHONES:• In Summary, Sprint uses a combination of TDD and FDD 4G LTE technology, mixed up with old school

CDMA voice so one needs to buy special phones to move into the Sprint network. For example, not just any iPhones 6 would work on Sprint’s TDD network. You need to buy a certain version that contains these radios that support the use of Sprint’s 2500 TDD band.

• It is relatively straight forward to use a phone between ATT and T-Mobile or use a European phone into either of these networks.

• This requirement of special purpose phones for Sprint is important to point out because technology that is less prevalent ultimately becomes more costly versus the dominant version and loses in the long term.

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A few words on Frequency Spectrum

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Sprint – A Note on Frequency Holdings

THE SPRINT FREQUENCY SPECTRUM:• Sprint owns about 65 MHz bandwidth on the 2500MHz EBS / BRS band. It can potentially lease more.

• For 4G data, Sprint is deploying three LTE 20MHz unpaired carriers in 2500 Band on TD LTE, 1 LTE 10MHz paired carrier in 1900MHz band on FDD LTE and 1 LTE 5MHz carrier on the 800MHz band also on FDD LTE.

• The older CDMA voice and data network run on a few carriers on the 1900 MHz band and a single voice carrier on the 800 MHz band.

A NOTE ON SPRINT’S 2500 ASSETS:• Sprint’s 65 MHz holding is an “unpaired” spectrum on 2500 MHz for TDD LTE and in terms of capacity and

performance it is comparable to a 30 MHz FDD LTE from its competitors. The FDD LTE with 20MHz means that there is a 30 MHz spectrum for uplink and also another 30 MHz spectrum in the downlink. The TDD LTE that Sprint runs on 65 MHz is a combined band for both uplink and down link use. So, although a deployment of 3 carriers of 20 MHz each by Sprint on 2500 Band TD LTE looks superior, but practically it is similar in its capacity versus its competitors when they deploy a 30 MHz carrier.

• By using Carrier Aggregation feature, a wireless carrier can increase the data rate of a call by allocating neighboring frequency bands to the data call. This has increased peak and average data call speeds.

• Sprint’s average throughput numbers on its data network are similar or less than its competitors in the RootMetrics.com surveys across the US. This shows that its competitors have sufficient frequency assets.

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Sprint – 2500 Band and its limitations

2500 BAND AND COVERAGE VS CAPACITY:• When compared to Sprint, the other three carriers have a lot more spectrum in the lower frequency

bands of 700 and 800 MHz. As a rough estimate, it would require about 3 times more sites to provide the same coverage footprint on a 2500 MHz band versus if the carrier would use the 700 or 800 MHz band. So, if ATT (or Verizon or T-Mobile) would have 50 thousand sites for a footprint in US at the 700 MHz band, and if Sprint would want to compete using its 2500 MHz band, then Sprint would need to operate 150 thousand sites to cover the same footprint.

• Any carrier relying on the higher band for coverage becomes automatically uncompetitive .

• 2500 Band is good for capacity additions in a dense urban environment (like Manhattan, NY or Tokyo, Japan) but additional cost of running an underlying 1900 and 800 network adds up high costs for Sprint.

• For Sprint, the optimal use of its assets is to deploy dense urban networks with 2500 band with capacity and small foot print of cell sites and use 1900 and 800 band to extend coverage in suburban and rural areas with large cell foot print.

2500 BAND AND IN-BUILDING COVERAGE:• The signal in the higher band operating frequency has less bending capability as compared to the lower

band signal. So, ATT’s (or Verizon or T-Mobile’s) signal operating the 700 MHz is easily able to bend around corners and provide good indoor and in building coverage versus the Sprint signal on 2500 band.

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Analyzing Wireless Data from Sprint

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Sprint – All About High Speed DATA

A FEW WORDS ON HIGH SPEED DATA:

FAT PIPES:• In data terms, we can identify three different types of networks. The old tech 2G/3G networks with typical

slow speeds for users of 0.3Mbps to 1Mbps (introduced 10-15 years ago), the more recent 3.5G networks where typical speeds for users are 1-5 Mbps (introduced in the last 5-10 years) and the high speed 4G networks where the typical speeds are 5-50 Mbps (built in the last 5 years and are evolving today).

• Though there have been some technology changes, the most improvement in the speed of latest wireless networks has come from increase in the width of the frequency band used by a data call. More data users and higher data rates require that the frequency pipe used by a cell site to be fatter than ever before.

• For the wireless operators, owning a fat pipe of frequency is a fundamental to success.

LTE IS FLAT AND FAST:• The new 4G LTE networks are designed to be flat removing bottlenecks from earlier network designs. • The new wireless networks are becoming as fast or better than the home cable networks. Consider this -

on a 2G/3G wireless network, the typical delay was 300-400msec, over the 3.5G network this delay was around 100-20msec and over new LTE networks this has decreased to 20-50msec.

• Due to this, video streaming and real time services have a comparable performance on public wireless versus cable connections.

• Viewers are now comfortable watching video streaming on an LTE network since there is unnoticeable delay (for live streaming) and the bandwidth of the connection with few Mbps is adequate for good quality video streaming (SD quality at less than 1 Mbps and HD quality around 5 Mbps). This has led to an explosion of video sharing traffic on the wireless networks leading to demand for bigger high speed data buckets and fat pipes by the wireless operators. Competition is brining the high speed data price down.

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Sprint – Frequency and Footprint

FREQUENCY, FOOTPRINT AND SPRINT’S 2500 BAND:• The footprint of a cell site depends on several factors – the power used by the site, height of the antenna,

clutter in the surrounding areas and angle of tilt of the antenna. However, if all other things are comparable, the wireless signal transmits much further on the 800 MHz band compared to the 1900 MHz band which propagates better than the 2500 MHz band.

• When comparing the wireless networks, it is important to consider the locations where this comparison is to be made. Is the competition for “Dense Urban” networks like Manhattan where a cell site may be less than 500 meter away, or an “Urban” setting like Chicago suburbs where the cell site maybe 1-2 km away, or a “Suburban” comparison like across New Jersey state where a site may be 5 km away or for a “Rural” service across Pennsylvania’s small rural roads where the site may be more than 10 km away.

• As a rough estimate and for comparison, we can say that a 2500 band site has a good enough signal up to 2 km, a 1900 site has a good enough signal up to 5 km and a 800 MHz site has a comparative good enough signal up to 10 km or more with changes done in the network design.

• In our view, Sprint is somewhat competitive versus others only in a “Dense Urban” environment but does not have enough frequency assets for other areas of the country. Competitor A with 1000 sites for the same area will do better than Competitor B with 500 sites in a “Dense Urban” environment where Capacity is an issue. ATT and Verizon both have the spending power to increase their cell count.

• Sprint’s advantage in owning a large part of 2500 band in Dense Urban environment is blunted by the need to have special phones that work on the 2500 band only used by Sprint.

• Even in Dense Urban locations, Sprint runs an underlying 1900 and 800 LTE network in most places where ever 2500 network is running which adds to the cost of running multiple sites to cover the same location further adding to the complexity of its network design and over running costs.

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Sprint – A 4G Network with Limitations

SPRINT’S 4G LTE NETWORK:• Sprint has deployed 4G LTE network with 5MHz width on 800 MHz, 10 MHz width on 1900 MHz and 3

carriers of 20Mhz width unpaired on 2500 band (20MHz unpaired TDD similar to 10MHz paired FDD). Sprint also has CDMA EVDO data on 1900MHz.

• For Sprint users with phones supporting its 2500 band TDD network, the users are on 2500 TDD band until they reach its edge and then the phones get service from 1900 FDD LTE network, reaching its edge, they move to 800 FDD LTE network. On the edge of 800 LTE, phones move to old CDMA EVDO data network.

• Practically, the Sprint user (with a phone that support all these bands) can be in any of the four different data network layers receiving data service. While the phone is going up and down these LTE data network layers, it still has to fall back to the Sprint CDMA network for voice call services.

• In our view, Sprint’s LTE network design is one of the most complex combinations around and this unnecessary complexity is also contributing to some of the problems adding up for Sprint’s data service.

SPRINT DOES N’T HAVE 3.5G DATA:• In case of Sprint, there are a number of differences in its data service versus its competitors. • Sprint does not support data on its 2G/3G 800 MHz CDMA frequency network due to the small amount of

frequency band it owns which is used by voice. Its 2G/3G 1900 CDMA EVDO network has speeds of around 0.3-1 Mbps. If a Sprint customer’s phone does not support the high speed LTE network or is out of LTE coverage, it would get this 2G/3G speed of its CDMA EVDO network which is pretty bad for today.

• For ATT and T-Mobile, if the user’s phone does not support 4G LTE or is out of its footprint, the networks provide 3.5G network speeds typically in the range of 2-10 Mbps. Meanwhile Verizon is focused on building an extensive LTE footprint.

• A Sprint customer not on its LTE 4G network would receive a much worse performance compared to the other competing networks since Sprint has no comparable 3.5G data network versus its competitors.

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Sprint – Data Capacity and Subscriber data rate

WHAT IS DATA CAPACITY ON A CELL SITE?• In a Voice Call, capacity limits on a cell site relate to how many voice calls can be handled by the site at the

same time. There is a clear block of calls after the call handling limit comes in the cell site. • For a Data Call, capacity is a mix of number of users and data rates achieved by these users. The same site

can handle a lot more users with low data rates versus few users with high data rates. • Various simulation results show that a fully loaded cell that uses a 10MHz paired (20MHz unpaired) carrier

is able to provide an aggregate of 15-20 Mbps data rate. This can be shared by all the users on the cell site. However, when the site is lightly loaded, a user can get a high data rate if he is close to the cell. On a 10 MHz carrier a user can get close to 70 Mbps in the best case scenario. If the site is heavily loaded the individual data rate for the users can dip towards 1 Mbps or lower.

• Poor data rates on high bandwidth sites in reasonable coverage would suggest that the site has high load and needs more capacity. Similarly, high data rate on a cell site can indicate low traffic on the site.

• Various testing teams conduct comparative tests of the US wireless networks. What is missing from their results of peak and average data rates is any estimate of capacity or traffic on cell when the test are done.

SPRINT’S NETWORK DENSIFICATION DRIVE:• “Densification” of the wireless network that Sprint has embarked on, in a Dense Urban location like

Manhattan, requires additional site buildup – even when it is small cell utility pole mounts, indoor DAS systems for multi story buildings, or pico cell overlays and all this needs serious funds.

• Ultimately, the investment in the network must generate additional revenue to justify these network densification costs.

• Sprint’s plan of “build the network and customers will come” is not enough. Sprint will have to be aggressive and go for a price war in order to gain customers.

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Analyzing Wireless Voice from Sprint

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Sprint – Analyzing the Voice Service

SPRINT HAS CDMA VOICE:• Sprint and Verizon use CDMA technology while ATT and T-Mobile use GSM /UMTS technology for their

voice call services. These are technology variations but overall, for voice, the carrier with more cell sites and better coverage fares better for the voice service.

• Sprint uses the 1900 PCS band for its CDMA voice and it has additional, although less, capacity on its Cellular 800 band CDMA network that extend its voice coverage footprint.

• For now, Sprint has an acceptable voice call quality on its 2G/3G CDMA network versus competition.

• Because CDMA technology for Sprint’s voice service is more than 15 years old, there are technical limitations in improving the call quality of Sprint’s voice network. The network needs upgrade for voice.

SPRINT HAS NO VOIP:• With new LTE technology, voice has become just another bearer service like data. The three carriers ATT,

Verizon and T-Mobile have already introduced VoIP (Voice over IP) over their LTE networks. • It takes more than a year in network design and improvements to provide a good VoIP call on the new LTE

technology versus the existing voice call infrastructure. The three major operators have already addressed most of the issues and have good (Verizon, ATT) to reasonable (T-Mobile) call quality on VoIP.

• Sprint, however, has not introduced VoIP, and it lags far behind its competitors in this transition.• The gap is widening both in terms of technology and quality as Sprint’s competitors have already started

the transition and will be able to farm their older frequencies into LTE couple of years earlier than Sprint.

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Sprint – Analyzing the Voice Service

VOICE IS COMMODITY, HIGH SPEED DATA IS VALUABLE NOW:• Few years ago, a cell phone service package meant a bundle of voice minutes and SMS that the subscriber

could use in a month. However, with the new technologies and stiff competition, voice and SMS services have become so commoditized that these are now typically given as “unlimited” and bundled with a package of high speed LTE data of various sizes. The key for all operators is to keep the voice quality at a high level and increase the network performance for high speed data.

• Messaging services like WhatsApp, Viber, Messenger, Skype and WeChat have enabled voice calling features and it looks like voice is eventually just going to be another bearer on a data platform which is how the LTE technology was designed in the first place.

• Sprint has adequate high frequency assets but less competitive 1900 and low frequency assets. As VoIP is launched in the next few years by Sprint, those low frequency assets which are used by voice will be available for high speed data to enable coverage enhancements. But for Sprint to re-farm these assets, first it has a lead time of at-least two years before it has a good VoIP product in the field, and only then those low frequency assets could be used.

SUMMARY FOR VOICE ON SPRINT:• Sprint is lacking in VoIP rollout. This will impact its re-farming of low freq. CDMA frequencies.• Voice service is a commodity now. Carriers offer similar packages for voice. • Messenger services with voice capability are challenging “old school” voice.• Old school CDMA has inherent limitations and Sprint is slow in its transition.

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BUSINESS STRATEGY

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Sprint – Business Strategy that needs adjustment

BUSINESS STRATEGY AT SPRINT NEEDS FIXING:

• At this time, Sprint’s business strategy is to leverage the deep pockets of Softbank and its connections to stabilize and grow into a profitable company. Softbank has prior experience turning around Vodafone Japan’s assets and turning into a profitable company. However, in that case Softbank mobile was the first and exclusive partner for iPhone in Japan and benefitted from Apple’s experience and the use of standardized global UMTS technology. In Sprint’s case there is no exclusive phone and Sprint’s wireless technology is more different and complex than the rest of the three carriers.

• In our view, Softbank would need to spend another 30 billion to make Sprint a growing company and a formidable competitor in the US wireless market. Roughly around 10 billion to cut down Sprint’s debt load, 10 billion to beef up low frequency assets and 10 billion for additional network investments.

• In our view, Sprint has issues to resolve both in its Sales and its Network Technology Strategy.

• While T-Mobile has been able to come from behind in the last three years and taken share from the market leaders, using marketing prowess, product innovation, leadership, and deep pockets of its German parent, there is little evidence to show that any of these changes are taking place in Sprint today.

• While full marks should be given to the new Sprint CFO for taking control of the financial affairs, the problems for Sprint are both in sales and technology and CFO alone cannot fix this.

• At the end of the day, Sprint is selling a technology product and in a very competitive market and without an effective sales strategy and a competitive network, it will remain fighting a losing battle.

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Sprint – What Next?

STRATEGIC OPTIONS FOR SOFTBANK ON SPRINT:

• A solo flight by Softbank with Sprint will cost it about 30 billion in our estimate. But in addition to funds, Softbank would also have to fix issues in the sales organization as well as limitations in network design.

• A merger of Sprint with T-Mobile is off the table in the current political climate. Whether the 2016 election is won by a Republican or a Democrat, there is a fair case for decrease in market competition with a T-Mobile and Sprint merger and so such a merger will not go through in the near future.

• Sprint may align with Dish Network at some point so that some of the DISH frequencies can be used along with Sprint to design a more competitive network and add to cross selling bundles similar to what ATT is doing after purchasing Direct-TV. However, it depends at what price the Sprint network becomes valuable for DISH. Would DISH be looking for low price to enter or a restructured Sprint with less debt?

• Sprint can also be an interesting target for Software or Application providers like Facebook, Google, Apple or Microsoft. These players have the deep pockets and the experience in the mobile space to consider a Sprint buyout or partnership. But even for these players, the key question is – how easy it is to turn Sprint around and how much time and money it would take? Subscriber growth is key to Sprint investment.

• Content and Cable network providers like Comcast or Charter may also consider an investment in Sprint to expand their monopoly power.

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CHANGE THE

SALES STRATEGY

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Sprint – Change the Sales Strategy

SPRINT NEEDS A BOLD STEP IN DATA PRODUCT PRICING:• Sprint has made progress in recent quarters by containing subscriber losses. But growth remains elusive. • The market is very competitive and the other players react quite swiftly to each promotion. • Sprint cannot generate enough traction by offering just the same product at a matching price point.• It has to offer a product that the customer cannot refuse. A product that is priced closed to its ARPU

(average revenue per customer) but has a high speed data offer that is a mile better than its competitors.• Sprint’s current pricing is not clear due to add-ons and extra fees. The marketing is somewhat deceptive.

SPRINT PRODUCT PRICING: AN EXAMPLE:• Consider Sprint’s unlimited data plan. Sprint offers an unlimited data package at 75$ a month, but there

are surcharges, fees, taxes and activation added on top. In the fine print there is the 23 GB limit listed. • The customer does need to sign a long term contract and also must buy a new phone.• Sprint marketing compares prices to ATT, T-Mobile and Verizon but what about Cricket (reseller of ATT),

MetroPCS (reseller of T-Mobile) or others? The customer that is shopping for a good plan is definitely going to look at what is available in the market and not only what Sprint’s advertisement says in a TV ad. Plus any deceptive marketing is going to come out.

• Just last month, I walked into a Best Buy store and asked the sales guy for the best priced plan for unlimited data. He recommended Cricket which gives unlimited voice, SMS and high speed data at 60 dollar a month with no additional costs. It is pre-paid (month to month)and if u have an international phone or a ATT or T-Mobile phone, just buy a 10 bucks SIM card and the phone is working in minutes. I used this Cricket connection in Chicago and it was unlimited data and voice and then I travelled to Toronto roaming on Rogers network and the prepaid unlimited plan continued. I rate this Cricket plan based on ATT network as the best plan for unlimited right now.

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LEAD IN PRICE AND INNOVATION:• Both Verizon and ATT position themselves as players with the most extensive coverage and the best

network quality. These operators can offer triple and quad play service offers with fixed or home phone service, cable, broadband along with mobile wireless service bundles. The smaller players, Sprint and T-Mobile, need to compete on price while improving their product.

• T-Mobile has been able to grow rapidly in the last few years despite having a less competitive network versus the two market leaders ATT and Verizon. This happened due to its bold product and its marketing campaign “Un-Carrier” where it started no contract plans (versus two year contracts from its competitors) that gave more flexibility to its customers. It introduced many new features like VoIP, Wifi calling, calls to Canada and Mexico added to base plans , its “Binge-On” high speed data use campaign that allows select music and video sites used unlimited and off data plan limits (while squeezing the data rate of the video).

• Sprint has been just trying to catch up with T-Mobile which is not sufficient. Leasing has been one innovation but it is matched by competitors and customers do need to swap phones coming into Sprint for which cheap multi band phones along with a phone subsidy would be required.

• Between ATT/ Verizon network quality and T-Mobile’s innovation, Sprint has to find a way to gain customers and this cannot come from a matching price or deceptive marketing but a clear best price versus all major players in the market. No fine print, no hidden costs and charges, no marketing gimmicks or false advertising required. Sprint needs simple plans that are low cost keeping in view that a new customer must buy a new phone on Sprint which is an additional cost.

• Until Sprint can get its pricing right, and its message clear, we will not be seeing a rush of customers to the Sprint stores any time soon.

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BRING A TRULY BEST PLAN TO MARKET:• Voice and text are a commodity now. The high speed data offer is more valuable for smartphone users.

With its 2500 MHz LTE network in place, Sprint needs a competitive price for its high speed data.• On top of a good priced plan, it would be even better if Sprint can throw in a free or subsidized phone for

a new customer. For example, offer a 100 dollar triband phone and an unlimited plan at 50 dollar a month with first two months free and with no hidden costs, monthly add-ons, surcharges, and no contract. Sprint can add fair use and 23 GB limit clauses but it does need to be bold data plan.

• Sprint can also explore other innovations like offering LTE data bundles where the customer gets to see commercials on its screen. How about giving a 2 GB data bundle if the customer is ok to have ads running on the border of the smartphone screen or Ads that come up every 2 or 5 minutes during video use.

• Typical data bundles are 1GB, 2 GB, 5 GB, 10GB etc. If the mobile gets 5 Mbps data rate on a LTE data call, he is able to download about 40 MB in a minute and 2.25 GB in an hour. A typical TV show in HD is about 600 MB and would need a 5 Mbps connection. So a typical customer with a 2GB limit will be able to watch 1-2 TV shows in HD and is maxed out for data in an hour with data that he bought for a month. What is needed is at least 25, 50 and 100GB data plans that are affordable and are in the 50-80 dollar range. T-Mobile is able to address this market segment and running away with customer additions.

SPRINT NEEDS COLLABORATION WTH VIDEO CONTENT PROVIDERS:• To effectively compete in the data space, in addition to pricing changes, Sprint must also align with

content providers to counter “Binge-On” offer where T-Mobile squeezes the video quality but gives unlimited use for select video sites so that the video data does not overload its network.

• Carriers have experimented with different revenue sharing models since the carriers know the subscriber location and at different layers have access to content filtering. It appears that Sprint has been so entangled in its existential fight, that it has not been able to focus in this area.

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CHANGETHE

TECHNOLOGY STRATEGY

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Sprint – Change the Technology Strategy

SPRINT CUTTING ITS NETWORK SPENDING:• Sprint has made a big cut in its network spending from 4.5 billion to 3 billion for this year. This suggests

that Sprint would go slow in its plan to build the 80,000 small cells and additional macro sites in its “network densification” plan that it announced in the beginning of this year.

ADRESSING FREQUENCY ASSETS:• The key issue in our view is that the Sprint network may become somewhat competitive in Dense Urban

environment like Manhattan, NY, with additional deployments, but the lack of effective indoor coverage issues with 2500 band will remain. In the Urban, Suburban and Rural environments, the operator does not have enough competitive frequency assets in low band to compete with Verizon, T-Mobile and ATT.

• Sprint should consider options to increase its low band spectrum including participation in the 600MHz auction directly or through a proxy firm. If Softbank is committing to long term viability of Sprint, then it makes sense to invest funds in this auction.

RATIONALIZE OVERLAPPING LAYERS OF DATA NETWORK:• Deploying multi-layers of 2500, 1900, 800 LTE along with EVDO date all to cover a Dense Urban

environment is too much overlapped coverage with extra costs running multiple sites, transport, antennas etc. Sprint needs to spread its assets so that areas that need coverage are built with 1900 & 800 LTE and capacity areas are built with 2500 supplemented with 800 for indoor coverage.

• Across the network topology, there is too much complexity in the design of Sprint LTE / HRPD data network. There are three different carriers on 2500 band. There is another carrier on LTE 1900 band and another one at LTE 800. Below this is the EVDO network on the 1900 band. The phone can be in one network at any one time. The base layer for triband phones is 2500 band. Besides wasting battery life, the multi layer network is prone to connection failures due to this complexity.

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EXPPEDITE USE OF TRIBAND LTE PHONES:• Sprint should expedite use of multi band phones in its network so that all of its data customers can use

the high capacity 2500 band relieving the much congested 1900 band. It needs to offer low cost multi-band phones that have radios that support its multi band combination and it needs to quickly phase out phones that support only one or the other band.

NETWORK UPGRADE: NATIONAL VS LOCAL:• Rather than investing nationwide on an ambitious expansion plan with 80,000 small cells, and then

waiting for nationwide customer additions to show up, Sprint should start with focused network deployment. Pick two cities like Manhattan, NY and San Jose, CA, and build a top performing network. Offer a best price for service in this focus city versus competitors and generate a marketing buzz that is measured versus customer gains. Improve pricing and sales strategy and then take it to the next level.

HOLD OFF REPLACING MACRO SITES WITH SMALL CELLS:• Sprint has indicated a strategy to move off the shared tower company cell sites and the costly leases that

are associated with it. Sprint seems to be moving towards building its own dedicated cell sites and has discussed replacing macros with utility pole mounted small cells.

• Thought it makes financial sense on paper, but technically it would seriously hurt the quality of the Sprint network if it would move off most of its leased macro sites to pole mounts. Besides permit and zoning issues, this would require a redesign of the entire footprint of the carrier’s wireless network and in absence of tunable antennas that are standard with macros cell sites but not so with small cells, the network would loose a key capability of antenna tilt adjustment effecting coverage footprint.

• The idea may be just a leverage point in Sprint’s negotiations with the tower firms for repricing of cell site leases and whether this transition actually is implemented remains to be seen.

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RATIONALIZE NETWORK FOR TRAFFIC PATTERNS:• Sprint has some 2500 band sites in suburban farmland where it does not appear that a capacity site would

be needed and a 1900 or 800 band coverage site should be deployed. Then there are locations where multi band sites are deployed where most of the traffic could go to the 2500 band. Sites where there is really low traffic should be adjusted so that these cells have a large footprint and the number of these cell sites is reduced. It is typical to have 20% of the cell sites generating 80% of the traffic and revenue in a wireless network. However, the key to profitability is to spread out less profitable sites in order to generate cost efficiencies.

DENSIFICATION SHOULD COME AFTER SUFFICIENT COVERAGE IS DEPLOYED:• The only solution to coverage problems is to provide sufficient coverage with new cell sites. In areas

where the network needs more macro or large sites, Sprint cannot just add small cells and expect the coverage to improve. Small cells can enhance coverage and provide capacity but cannot be a substitute for macro cells where effective coverage is required.

• Before going down the small cell path, Sprint should analyze whether its current coverage is sufficient to match rivals. Densification for capacity should come when the base layer is effectively deployed.

VoIP SHOULD BE INTRODUCED:• The voice network is based on old CDMA technology and its inherent limitations and lack of new software

upgrades does not allow sufficient improvement in voice network quality and performance. • Sprint is way behind other operators in its VoIP product. Rather than planning for a VoIP launch in the

distant future, Sprint should focus on launching in one city and then develop its VoIP product further.

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TRANSPORT COST AND SMALL CELL BACKHAUL:• For an effective data network, the cell site needs to have a fat pipe and behind the site the transport

network also needs to be fat enough to sustain good site throughput. Investment in backhaul leased lines, ethernet, microwave or fiber backhaul would have to increase to sustain higher customer data rates when the traffic increases in the network.

• Sprint is using the 2500 band frequencies for its small cell transport which makes financial sense. However, on a technical level this backhaul would limit the performance of the small cell as well as the macro donor site.

PREPARE FOR HIGH VIDEO USE IN THE NETWORK:• T-Mobile already adjusts the video connection of its users so that rather than HD video quality, the SD

video quality is used and the data rate is lower for its customers. This allows T-Mobile to offer more content for its subscribers and at the same time frees up capacity in their cell sites and transport backbone.

• Sprint needs to devise a comparable strategy so that it is able to launch lower price data packages for LTE.

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THE END

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sprint – strategy analysis by v1.0

Leadership & Management