The third-largest U.S. wireless carrier Sprint Nextel Corp. (S) will unveil a next-generation 4G “push-to-talk” service this weekend.
Sprint will replace the iDEN network on CDMA-based phones with the latest version of Nextel's push-to-talk feature from Qualcomm Inc. (QCOM). Sprint is consolidating multiple incompatible networks (CDMA, iDEN and LTE) into one platform supporting multiple technologies (3G and 4G) and spectrum bands (800 MHz, 1.9 GHz, 1.6 GHz and 2.5 GHz). Sprint will gradually terminate its iDEN network in 2013.
The move adheres to the Network Vision plan, announced last year. The Sprint Direct Connect push-to-talk feature will offer speedy data services. The new feature is expected to generate $10 billion to $11 billion in savings over the next seven years through efficient use of capital, reduced energy costs, lower roaming expenses, backhaul savings and the eventual reduction of total cell sites.
However, Sprint will shell out about $4 billion to $5 billion over three to five years to upgrade its network equipment.
Sprint Direct Connect service is expected to grow rapidly early next year and match the current CDMA voice coverage area. The direct connect coverage would be almost three times the coverage area of Nextel’s iDEN network.
To support the direct coverage, Sprint will launch three Sprint Direct Connect devices by the end of the year. The first handset –– Kyocera DuraMax –– will be unveiled on October 1 for $69.99, with a new two-year service agreement. The second phone –– Kyocera DuraCore –– is expected to be launched by the end of the year. The third would be a Sprint Direct Connect Android device from Motorola Mobility Holdings Inc. (MMI) with a fourth quarter launch target.
We currently maintain our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains a Zacks #3 (Hold) Rank.
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