Sprint’s Chief Executive Officer, Marcelo Claure, has been discussing their network strategy on a call with investors. During the call, Marcelo commented on Sprint’s current strategy of investing into small cell sites in order to densify its network, which follows comments and observations taken from the start of the year. Indeed it was back in January that Sprint started talking about its “radical overhaul” of its network, with significant cost savings through using many small cell sites. This network policy included moving existing network infrastructure away from established masts (typically leased from Crown Castle and American Tower) to less expensive land. As to how much cheaper things are: earlier in 2016, Sprint lowered its capex estimate from $4.5 billion to $3 billion, a significant reduction.
Capex, that is capital expenditure, is an important part of the cellular carriers. The majority of a carrier’s capex is spent on improving the cellular data network and the classic rule of networking is the less a network spends on the cellular towers and equipment, the less able the company is to improve their network. Sprint’s expected capex for 2016 was already low in the context of the industry and the reaction was one of caution, even despite Sprint’s assurance that it was smartly densifying the network differently to the competition. Marcelo’s comments today discussed some aspects of Sprint’s networking plan: during the second quarter of 2016, Sprint invested $376 million into its network compared with $1.6 billion in 2015. Some industry analysts point toward Sprint facing financial difficulties investing the same sum into the network for 2016 and this is difficult to ignore: Sprint is the least able carrier to invest a significant sum into its network. However, parent SoftBank invested $31 billion into buying British chip designer ARM Holdings, rather than pumping more cash into Sprint: this illustrates that SoftBank is at least comfortable with Sprint’s position.
Where Sprint is different to its competitors is how much spectrum the carrier has, which is allowing the carrier to build its network in a different way to other national carriers. Sprint has significant holdings available at the 2.5 GHz frequency point and has elected to sit out the 600 MHz auction that the FCC is currently staging. This gives the carrier the flexibility to use wireless backhauling (that is, using the wireless network to send data from the tower to Sprint’s core network), which cheapens the installation of the small cell sites as well as densify its network. However, looking forward, Marcelo is expecting Sprint to increase both capital and operational expenditure as the carrier densifies its network but compared with previous years, things will be different: Sprint is able to use different and new technologies that it did not have access to before. Marcelo did not state how many sites Sprint has installed across the county but said that he would “when the time is right.” He also mentioned that going forward, Sprint should be in a good position for 5G network plans: “If you look at the foundation of 5G, it’s pretty clear that it’s also having a very dense network and suddenly this strategy that we started discussing a year, a year and half ago that everybody made fun of and now everybody is chasing.”