Sprint’s choice to opt out of airwave auction a big gamble
Some say spectrum could shape future of phone industry
Sprint says it won’t be putting any money toward an intensely watched auction for wireless airwaves next year, in what amounts to the company’s biggest gamble since it tried (and failed) to buy T-Mobile.
By choosing not to compete with its bigger rivals for new radio frequencies, Sprint is making a bet on the assets it’s already got. It’s a big decision that could prove pivotal as the company tries to engineer a massive turnaround from its fourth-place position behind T-Mobile, AT&T and Verizon.
“Sprint is prioritizing its financial resources to improve our network coverage, capacity, speed and reliability now and over the next few years,” Sprint spokesman Jeffrey Silva said.
Sprint faces mounting doubts about its ability to survive in what’s become a hypercompetitive industry. A long, bruising fight among all the carriers over wireless plan prices last year led to the end of two-year contracts and device subsidies. Now consumers have more freedom than ever to switch providers, along with entirely new ways of paying for smartphones. And more changes are on the way.
Analysts expect the looming airwave auction to play a big role in shaping the future of the industry. It’s designed to grant access to special types of radio waves, or spectrum, that can carry cellphone calls and mobile data across long distances and through thick urban walls. For an idea of how big a deal this is, the most recent spectrum auction surprised everyone by raising over $40 billion. And that was for spectrum that’s considered less valuable than what’s in contest for the upcoming auction.
Wireless carriers of all sizes plan to use this spectrum, which operates at frequencies of 600 MHz, to expand their mobile broadband networks. It should make everyone’s cellular data faster and better able to handle intensive applications like streaming music and video. The auction has been described as a oncein-a-lifetime opportunity, partly because carriers have never had so much access to such premium invisible real estate before.
For Sprint to turn down a chance at gaining some of this game-changing spectrum raises questions about the company’s long-term strategy. Sprint says that it doesn’t need any more spectrum to improve its network and that the money it saves by not participating in the auction will actually help it invest in other ways. Any spectrum it acquired in next year’s auction probably couldn’t be put to use anyway until 2020 at the earliest, Silva said.
But some analysts say Sprint is backing out of the auction because it doesn’t have a choice, as it’s hemorrhaging cash too quickly to have any extra left to spend.
“It simply doesn’t have the financial resources to buy more spectrum at this point,” said Craig Moffett, an analyst at MoffettNathanson. “Eventually, their only way out will be to find a merger partner. For now, they’re just trying to keep the wheels on.”