Sprint, America’s fourth-largest wireless carrier, is targeting mobile virtual network operators (MVNOs) to compete for market share in the wake of the collapse of its merger deal with T-Mobile.
An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers.
Already, Sprint and Altice USA, the fourth largest cable company in America, have agreed to a strategic MVNO agreement that will allow Altice to launch its own wireless carrier using Sprint’s network, the two companies announced a day after the merger talks between T-Mobile and Sprint were officially called off.
The deal would enable Altice USA launch a wireless carrier using Sprint’s network.
However, Sprint CFO Tarek Robbiati said the Altice partnership was not contingent on merger talks with T-Mobile failing.
Robbiati said the deal with Altice would’ve been completed regardless of whether Sprint’s merger with T-Mobile went through, and noted that Sprint is open to other MVNO deals with cable companies if those deals give Sprint access to their networks.
Analysts say without the T-Mobile deal, Sprint will have to work on deals like this if it hopes to ever catch up to AT&T and Verizon in terms of network quality and subscribers.
Altice, which operates Optimum and Suddenlink, and was previously known as Cablevision, did not say when it would launch its mobile network. Considering how long it took Comcast to launch Xfinity Mobile on Verizon, however, it should take around a year for the network to get up and running.
Besides a nice check from Altice for using its network, Sprint will also get help in “densifying” its network from the cable company. This will likely manifest itself in Sprint customers being able to use Optimum’s Wi-Fi network, which could help fill some of the holes in Sprint’s coverage.
Sprint will also have access to Altice’s cable infrastructure to transmit cellular data and help build out its 5G network, according to Reuters.
In a separate announcement, Sprint majority owner SoftBank announced it would increase its stake in the mobile network. Currently, SoftBank owns 82 percent of the company. It noted that its stake wouldn’t exceed 85 percent of outstanding common stock; exceeding that number would trigger a tender offer.
Sprint Corp’s shares fell more than 13 percent on Monday after the No. 4 U.S. wireless carrier called off merger talks with T-Mobile US Inc and a wireless partnership with cable company Altice USA failed to appease investors.
“It will not deliver the tens of billions in synergies we had foreseen in a merger with T-Mobile,” Chief Financial Officer Tarek Robbiati said of the Altice agreement on a call with analysts and reporters. “Nonetheless, it does deliver real value for Sprint.”
Sprint’s shares were down 12 percent at $5.84 after earlier falling as much as 13.5 percent,
Altice said it would sell mobile service on Sprint’s network under a new multi-year agreement, becoming the latest cable company to enter the wireless market.
He also said comments by Sprint Chairman Masayoshi Son on raising capital expenditure to $5 billion to $6 billion annually, from $3.5 billion to $4 billion, was for the medium term and not for 2017.
Asked how Sprint would pay for the increase in spending, Robbiati said the company could fund it through cash, debt and borrowing against its spectrum, or wireless airwaves.
Last year, Sprint said it would raise an initial $3.5 billion by mortgaging about 14 percent of its spectrum.
Jonathan Chaplin, an analyst at New Street Research, said $5 billion to $6 billion annually was the minimum level at which Sprint could build a credible network, but the company faced challenges in catching up with wireless carriers that are moving ahead with developing next-generation networks, or 5G. “Sprint is trying to catch up to a moving target,” he said. “I think the market is going to be reasonably skeptical.” (Editing by Susan Thomas and Bernadette Baum)