WOTW looks at the Sprint capital expense drama and wonders if small cell could become a big problem for the carrier
Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
For an industry often considered rather risk averse, I can’t imagine another telecom operator that likes to play in the danger zone as much as Sprint.
Your welcome!
Now, it’s not that I think Sprint has some sort of death wish, but you gotta admit that when it comes to operating on the edge, Sprint has some of the sharpest shoes in the business. And, in general I am all for this courage.
(Though, in touting my admiration for this mindset, I feel that perhaps the true meaning was not properly received.)
Sprint in announcing its most recent quarterly results, noted capital expenditures for fiscal 2016, which began in April, could come in at around $3 billion. That might seem like a lot of money for a network that really doesn’t have any moving parts and thus should not need a whole lot of repairs, but in terms of the mobile telecom space, that’s peanuts.
Sprint did attempt to alleviate some of that concern by stating:
“The company’s deep spectrum position and its small cell focused densification are also expected to improve overall capital efficiency.”
Where have we heard that before?
For some perspective, Verizon Wireless spent nearly $3 billion on capex during its first quarter, and that’s with a network involving fewer cell sites. More perspective comes from the fact Sprint spent more than $6 billion over its previous 12 months on capital expenditures, and while it managed to gain some ground on its competitors in terms of at least network speed in a handful of markets, overall network reach continues to lag.
More interesting is that this planned cut in capex comes on the heels of Sprint bolstering its “liquidity” position to the tune of $11 billion, which would seem to be one heck of a reason to go on a spending spree. Sure, Sprint lost $2 billion in fiscal 2015, but that was an improvement compared with the $3.3 billion lost the previous year, so why not party!
Well, a number of analysts in parsing out Sprint’s words have come to the conclusion the carrier is going through some uncertainty in terms of its “small cell focused densification” efforts in that its vendor partners are finding some municipalities are not that excited to have thousands of small cells strung around their towns. Having some “friends” myself involved in local municipalities, I can see where there might be some consternation from companies looking to deploy network equipment.
Plus, I have to imagine it can’t be easy finding power outlets and backhaul conveniently located in the exact position Sprint needs in order to take full advantage of these cells.
I guess it’s good Sprint is not relying too much on small cells as a means to boost its network, or at least that’s what we have been told.
Looking at all of this from Sprint’s perspective, I understand the carrier is still under the gun in terms of trimming overall costs and thus cutting back a bit wherever possible would seem to make sense. And, maybe all those billions of dollars and jobs thrown at Network Vision have finally paid off enough to put Sprint in a position where it can take its foot off the deployment pedal for at least a year and instead focus on some tuning efforts.
However, as noted by Iain Gillott from IGR Research, that basically means Sprint’s network of today is likely to be Sprint’s network of a year from now. I guess that’s good news for those Sprint customers that are currently bathed in coverage, but could put a damper on the carrier’s efforts to attract new customers in markets outside its core.
And it’s not like Sprint’s rivals are increasing their capex spending to further bolster coverage, capacity and to take advantage of new spectrum acquired in recent auctions. Oh … never mind.
I know we can’t blame all of the drama surrounding Sprint’s capex disclosure on its robust small cell plans. Nearly all wireless carriers, and especially Sprint’s direct rivals, have all jumped on the small cell bandwagon to one degree or another. But, few have put such an emphasis on their deployment as being key to fleshing out the true scope and scale of their network and instead refer to such deployments as one of many in their network arsenal.
At some point in the future, will we look back at this moment in Sprint’s history and find this emphasis on small cells was the moment the carrier began to turn things around in leading the industry towards a new network architecture, or the moment the carrier completely left the tracks? I hope Sprint management sees that risk as worth a few billion dollars in capex.
I welcome your comments. Please send me an e-mail at dmeyer@rcrwireless.com.
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