Sprint May Partner With Dish For A Joint Wireless Service

Emboldened by the recent deal with Japanese carrier Softbank, Sprint (NYSE:S) is looking to make use of its surer financial footing to enter into potential partnerships with spectrum holders. The carrier has in recent months talked to Dish Network (NASDAQ:DISH) about a potential deal that will put Dish’s idle satellite spectrum to use in providing a wireless mobile service, according to Bloomberg. ^[1] Sprint may not be able to buy the spectrum outright considering Dish’s ambitions of entering the wireless game and the recent FCC approval it has received, but it could gain access to the resource if it agrees to host Dish’s wireless services on its network. While it is unclear what the terms of any potential agreement would be, or even if the talks will proceed further, it does seem possible considering that Sprint has been looking for a replacement ever since its deal with LightSquared met an early demise after the latter failed to receive approval to use its satellite spectrum for LTE earlier this year.

This comes on the back of a $480 million spectrum and customer acquisition deal that Sprint made with US Cellular last month that will not only help improve its competitive standing against bigger rivals Verizon (NYSE:VZ) and AT&T (NYSE:T) but also augment its lagging LTE buildout. This improvement in fundamentals is exactly what we were talking about when discussing the recent Softbank deal that, upon completion, will bolster Sprint’s balance sheet by a total of $8 billion. (see Sprint Seeks FCC Approval For Softbank Deal; Fundamentals Look Strong)

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Sprint’s lagging LTE plans get a boost

While Sprint has only just started its LTE rollout with coverage in all of 43 U.S. markets as of November, the country’s largest wireless carrier, Verizon, has its LTE network available to more than 250 million Americans in over 400 markets across the U.S. AT&T’s lead over Sprint is not as wide, but it still offers LTE to as many as 160 million Americans, and plans to reach 250 million by the end of next year.

In order to bridge the gap, Sprint is aggressively executing on what it calls its Network Vision strategy to get most of its 4G LTE network ready by the end of 2013. The carrier is trying to phase out iDen gradually and consolidate its network holdings into one 2G/3G/4G network using a combination of CDMA and EV-DO. In addition to using spectrum from the U.S. Cellular deal, Sprint is planning to shut down the iDEN network completely by next summer and use the freed up iDEN spectrum to boost its LTE network in 2014. (see Sprint To Build LTE Over iDEN’s Grave)

Dish’s spectrum could also be used in the same way. Unfortunately for Sprint, however, it looks like Dish has wireless ambitions of its own. Dish plans to launch its own 4G wireless network using satellite spectrum to provide a land-based wireless broadband service. Lest anyone feel that Dish is touting its wireless ambitions in order to extract maximum value for its spectrum, CEO Charlie Ergen made a statement by stepping down from his post in June to focus on the company’s mobile strategy. Since Dish is serious about entering the mobile space, Sprint will probably not be able to buy the spectrum outright.

This is even more true now that Dish has secured the necessary approvals from the FCC to use its spectrum for providing wireless services. However, if Dish were to look to set its own wireless network up, it would be entering into a territory it has no prior experience in building and put it at the risk of competing against wireless carriers Verizon, AT&T and Sprint who are all aggressively deploying their respective 4G networks.

Dish may therefore agree to partner with Sprint to roll out a joint wireless service. Having secured the regulatory approvals, all Dish will have to do is to let Sprint use its infrastructure to host the spectrum and share the revenues or pay Sprint a flat fee.

Sprint, for its part, would have the benefit of added spectrum for its own LTE buildout. It could also help Sprint market its services to Dish’s satellite-TV customers and grow its subscriber base and vice versa (similar to Verizon-cable cross-marketing strategy). However, other potential suitors such as AT&T and Google may also be lurking on the scene to partner with Dish, in which case Sprint may have a tough time negotiating favorable terms.

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1. Sprint Is Said to Suggest Dish Partnership, Bloomberg, Dec 7, 2012 [↩]