Sprint Nextel Corp. (S:US), the third- largest U.S. wireless carrier, will introduce faster service based on the LTE standard in five cities on July 15, in a bid to catch larger peers Verizon Wireless and AT&T Inc. (T:US)
Networks supporting LTE -- short for long-term evolution -- will open in Atlanta, Dallas, Houston, San Antonio and Kansas City, with Baltimore soon to follow. The company is seeking to make good on a promise to have six cities with LTE by mid-year. Sprint already sells phones that work with the technology, though users won’t be able to take advantage of the faster speeds until the networks come online.
Even after the move, Sprint remains well behind Verizon, which has LTE in 304 cities, and AT&T, which offers the technology in 41 cities. To compete, Sprint is spending $10 billion on network expansion and it’s aiming to tempt users with an LTE version of Apple Inc. (AAPL:US)’s iPhone, expected later this year.
“Verizon and AT&T have a head start in LTE, but hopefully we will close the gap pretty soon,” Sprint Chief Executive Officer Dan Hesse said in an interview. “We will be pushing hard to get more markets launched as soon as we possibly can.”
Sprint shares were unchanged in today’s trading, closing at $3.13 in New York. The stock has risen 34 percent this year.
Sprint’s two-year network expansion, known as Network Vision, is increase expenses at a company that has already posted five consecutive years of losses. Adding to the financial pressure is Sprint’s four-year contract with Apple to sell $15.5 billion worth of iPhones. Sprint was the last of the three big U.S. carriers to get the device.
The burden of LTE upgrades and the cost of selling the iPhone highlight the challenges Sprint faces in a market where it competes with rivals nearly twice its size. AT&T has 103.9 million users and Verizon has 93 million, while Sprint has 56.1 million.
Sprint has explored deals to add scale. In February it broke off talks to acquire regional pay-as-you-go carrier MetroPCS Communications Inc. (PCS:US) Hesse said the industry was tilted heavily toward two players and that a stronger third player would have benefits.
“There is such a huge gap in size between No.2 and No.3 being Sprint,” said Hesse. “Consumers and the market would be served better by seeing more consolidation among the smaller players so they can have size and scale to compete more effectively with the emerging duopoly,” he said.
Hesse says his top focus is on the two years of network upgrades and not on acquisitions.
“For us to undertake a merger it would have to be compelling if we were to do it in 2012 or 2013,” said Hesse. “The hurdle is higher right now because of the importance of doing this project well,” he said.
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