Sprint Buys U.S. Cellular Spectrum, Along With 585K Subscribers

 
 
By Michelle Maisto  |  Posted 2012-11-07
 
 
 

Sprint has purchased portions of Personal Communications Service (PCS) spectrum from smaller carrier U.S. Cellular, along with nearly 600,000 customers in the Midwest, it announced Nov. 7. U.S. Cellular, in return, received $480 million in cash and the assumption of some liabilities.

Under the agreement, Sprint will receive 20MHz of PCS spectrum in the 1,900MHz band in markets including Chicago; South Bend, Ind.; and Champaign, Ill.; and 10MHz in the St. Louis area.

The purchase will help Sprint further its rollout of Long Term Evolution (LTE) technology, which is still very much playing catch-up to the increasingly extensive LTE networks of Verizon Wireless and AT&T.

Plus, the added subscribers will give it a bit more leveraging power in an ever-more competitive market. T-Mobile and MetroPCS in October announced plans to merge and aggressively focus on the prepaid sector and value-minded customers—areas that have been defining for Sprint.

AT&T, already a major competitor, also continues to push ahead. Since its proposed merger with T-Mobile was denied last year, it has been on a Wireless Communication Services (WCS) spectrum buying spree and has closed more than 40 deals already this year. The spectrum, which had been deemed unusable for mobile broadband, will house a new AT&T LTE network around 2015.

On Nov. 7, AT&T additionally announced plans to spend $14 billion over the next few years on wireless and wireline initiatives that CEO Randall Stephenson said would improve AT&T's "revenue growth and cost structure for years to come."

Sprint's purchase is its second major one since it sold a 70 percent stake in the company to Softbank, Japan's third-largest wireless carrier, for $20.1 billion.

On Oct. 18, Sprint sought to buy a controlling share of partner Clearwire. It filed paperwork with the U.S. Securities and Exchange Commission saying that it planned to pay $100 million to buy Clearwire co-founder Craig McCaw's stake in the company, which would boost its own from 48.1 percent to 50.3 percent.

Sprint announced the results of its fiscal 2012 third quarter Oct. 25, which included a loss of $767 million but also strides in its three-part plan to revive the company, which has been hurting since its 2006 merger with Nextel.

Analyst Eric Costa, with Technology Business Research, has said that while Sprint will continue to struggle through 2013, in 2014 it will return to profitability and have a robust Long Term Evolution (LTE) network footprint that will help it to drive data revenue growth.

Costa, in an Oct. 25 research note, also wrote that, with its funds from Softbank, Sprint might consider buying out the rest of Clearwire, or "possibly look into a merger with Leap Wireless."

Its new funds and a possible acquisition, added Costa, will result in a "reinvigorated Sprint becoming a strong third player, now with staying power in the market."

Sprint CEO Dan Hesse, regarding the U.S. Cellular deal, remarked that it will help make Sprint a "more robust competitor."

He added, "Acquiring this spectrum will significantly increase Sprint's network capacity and improve the customer experience in several important Midwest markets."

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