Sprint to Expand LTE in 100 Cities

The third-largest U.S. wireless carrier Sprint Nextel Corp. (S - Analyst Report) plans to launch its high-speed 4G LTE networks in 100 additional cities across US in the coming months. The LTE offers 10 times faster speed than 3G.

The company’s LTE services currently cover 19 metros including Atlanta, Baltimore, Dallas-Fort Worth, Houston, Kansas City, Missouri/Kansas City, Kansas, San Antonio and surrounding communities. Sprint would add more markets in New York, Chicago, Los Angeles, Boston, Charlotte, North Carolina, Miami, New Orleans, Philadelphia and Washington D.C.

The LTE expansion is the part of the multi-billion dollar restructuring program known as the ‘Network Vision’, which aims to combine 3G and 4G technologies into one seamless network. This would lead to the efficient use of capital, reduction of cell sites, the elimination of dual networks, backhaul efficiencies, reduced churn, lower roaming charges and energy cost savings. As a result, the plan is expected to generate $10 billion to $11 billion in savings over a seven-year period (2011–2017). The company expects the Network Vision deployment to be completed by the end of 2013.

In mid-July, Sprint had made its LTE debut in five major markets – Atlanta, Dallas, Houston, Kansas City and San Antonio. The company expects to complete nationwide deployment by the end of 2013. The LTE coverage is expected to reach more than 120 million people (or roughly half of its CDMA footprint) by the year-end and 250 million by next year.

Sprint is about more than one and half year behind the wireless giant Verzion Communications Inc. (VZ - Analyst Report) and 10 months behind the second wireless carrier AT&T Inc. (T - Analyst Report) in deploying LTE networks.

Verizon is leading the industry in LTE deployments, which covers 370 markets with more than 75% of the U.S. population. The company expects to expand its LTE networks to the entire nationwide 3G footprint by mid-2013. AT&T LTE service is currently available in 60 markets and expects to reach 100 by the end of the year. AT&T expects the LTE deployment to be almost completed by the end of 2013.

No doubt, the LTE investments will dilute 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 a Zacks #3 (Hold) Rank.