As per its previously announced schedule, the third-largest wireless carrier in the U.S., Sprint Nextel Corp. (S) recently launched its high-speed 4G Long Term Evolution (LTE) services in five markets – Atlanta, Dallas, Houston, Kansas City and San Antonio, along with 11 other towns located around these five markets.
Higher proliferation of smartphones and tablets has increased the demand for much faster network services. So, in order to meet the increasing subscriber demand as well as to compete with early movers Verzion Communications Inc. (VZ) and AT&T (T), Sprint came up with its first 4G LTE services in the above-mentioned markets.
Sprint plans to successfully deploy its LTE services to cover its nationwide network by the end of 2013, encompassing more than 250 million customers with 22,000 cell sites. The successful deployment will not only allow the company to sideline its existing WiMax Network but will also help it to reduce cost by installing fewer cell sites.
The development is a part of Sprint’s network upgrade plan, Network Vision, which aims to combine various 3G and 4G technologies into one seamless network, hence leading to efficient use of capital, reduction of cell sites, the elimination of dual networks, backhaul efficiencies, reduced churn, lower roaming charges and energy cost savings.
On the flipside, we believe that increased investment for the deployment of LTE networks across the U.S. by 2013 will lead to dilution of Sprint’s free cash flow for the next two years. However, liquidity is expected to improve once LTE is fully deployed.
We are maintaining our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains Zacks #3 (Hold) Rank.
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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