Sprint may lease cell towers on public lands to lower costs

Carrier cites $836M loss for the quarter, but reports increase in postpaid subscribers


Sprint today said it is looking at new ways to add cell towers while still saving money, and is considering not renewing costlier existing leases with third-party providers.

The range of money-saving options will include leasing towers on public rights of way, which is considered far less expensive than placing radio antennas on privately-owned land or rooftops.

"We are focused on densification, without jeopardizing the customer network," Sprint CEO Marcelo Claure said in an earnings call to discuss the company's earnings. "We'll look at towers, rooftops, and monopoles and then choose the most efficient way to plan. Everything will make the network more dense. By no means is this rip and replace."

Claure said Sprint will be "very opportunistic in optimizing antennae on lower cost infrastructure [such as] macro sites and public sites for similar or better performance at lower cost."

Chief Technology Officer John Saw said Sprint is "well aware" of its existing contractual arrangements with tower companies, which usually last five to seven years. "We're not exiting existing leases today," he added. "We'll have strategic relationships with tower companies for many years to come and will continue to be a strategic partner."

Tower companies like Crown Castle and American Tower typically build, own and then lease space on towers for carriers to locate their wireless gear. Sometimes all the major carriers will even lease antenna space on a single tower together. Sprint is reportedly looking to lease radio towers from Mobilitie to drive down costs.

Other network cost cuts could come from using microwave technology to replace fiber optic backhaul connections, Saw said. Sprint often leases backhaul capacity over fiber from AT&T and Verizon, but could use its own wireless spectrum to provide that capability. Backhaul is the industry term for the network connection from the base of a tower to the nearest switching center.

Saw and Claure did not put a dollar figure on the cost savings for the changes in leases and other network efficiencies, although Re/Code cited unnamed sources putting the value at $1 billion.

Their comments came during an earnings call where Sprint reported a net loss of $836 million for its third fiscal quarter, which closed Dec. 31. Net operating revenues were $8.1 billion, a decline of 10% over the previous year, but up 2% from the quarter that ended in September. Analysts had predicted revenues of $8.2 billion.

The company said it added 366,000 net postpaid phone customers in the quarter, its highest in three years. As of Dec. 31, Sprint listed 58.4 million wireless connections of all kinds, including subscribers. Sprint last year fell to the fourth largest wireless carrier. The rate of customer losses for the quarter dropped to 1.62%, the lowest for a third fiscal quarter in Sprint's 20 years in operation.

Given recent high marks from third-party network assessment companies like Nielsen and Root Metrics, Claure said "there has never been a better time to give Sprint a try." The company also extended by a month a plan giving 50% off competitors' rates.

The earnings report bolstered Sprint's stock price by 20% by mid-day Tuesday, reaching $3.06 at noon ET. The stock had fallen to $2.45 on Jan. 20 after news of the tower leasing plans was first reported.

Sprint said Tuesday it expects to see $2 billion in expense reductions by the end of March 2017. In October, Sprint said it was likely to cut its 31,000-member workforce to make up part of the savings. The company recently cut 2,500 jobs, according to the Kansas City Star and other estimates.

"Sprint is making progress with net subscriber additions and probably will continue to do so for the next several quarters," said Roger Entner, an analyst at Recon Analytics. "An improved network at rock bottom prices attracts more customers."

However, Entner warned that moving the network to less expensive cell tower sites could affect network quality. "It all depends on execution, and in the past Sprint didn't execute well," he said.

Copyright © 2016 IDG Communications, Inc.

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