Reality Could Slow A Sprint From Towers

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Sprint’s news that it could be moving radio equipment from towers owned by American Tower and Crown Castle – and SBA Communications – to less expensive structures and networks continued to percolate yesterday, spawning a variety of reactions by the industry. One telecom analyst well versed with the tower told investors that “we would need to hear more details here because we would (quickly) point out that Sprint still has multi-year contracts in place with each of these tower companies.” For instance, noted the analyst, Crown Castle has another six-to-seven years on its current master agreement with the Japanese-owned, Kansas City carrier, and American Tower Corp. has five years left.

The analyst also pointed out that Sprint has made no secret that it wants to reduce its dependence on the large telecom incumbents – AT&T and Verizon – for $1 billion annually for backhaul fees. After all, Sprint has nearly $34 billion in long-term debt and hasn’t seen a quarterly profit in a decade. Bottom Line? “While we need to hear from Sprint on this issue, this plan is in line” with the company’s previous guidance with Wall Street to “cut costs.” It’s just a “disruptive” model to tower companies. “Sprint’s plan is not for the faint of heart. Sprint needs to be solely focused on avoiding mistakes of the past, where network overhauls caused major disruptions in the network’s performance,” advised the analyst. Sprint has said it’ll make use of its microwave technology for backhaul which “isn’t popular stateside, but it does offer better capacity and is more cost efficient in some cases,” Motley Fool noted on Sunday. “But the challenge is that revamping network infrastructure is a massive project, and almost always entails service disruptions during equipment transitions. In the long term, the goal is an overall improvement in performance and cost structure, but in the short term, disruptions don’t help consumer perceptions about the network’s performance.”

January 19, 2016 |
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