Sprint's Bold Play on a 4G Network

No. 3 wireless carrier Sprint Nextel bets that high speeds and low prices on the first advanced broadband network will trump its rivals

By Cliff Edwards and Olga Kharif

Sprint Nextel (S), the nation's third-largest cell-phone carrier, is betting big on 4G. The company has spent several billion dollars in recent years to build wireless broadband service capacity to try to leapfrog larger rivals by offering consumers and businesses fast connections for smartphones, laptops, and other devices.

The advent of 4G networks could present a do-or-die situation for Sprint. Investors are pessimistic about the company's long-term prospects. Sprint is losing more than 2% of its highest-paying wireless subscribers each year, nearly double the rate of competitors AT&T (T) and Verizon Wireless, according to a Mar. 21 report from Barclays Capital analyst James M. Ratcliffe, who has a "neutral" rating on Sprint's shares.

Sprint bet on Palm's (PALM) Pre smartphone, which launched to great fanfare in 2009, but which hasn't come close to matching AT&T's sales of Apple's (AAPL) iPhone. Verizon, T-Mobile USA, and AT&T are taking steps to blunt any advantage Sprint might gain as it rolls out its faster network.

As a result, Sprint's stock performance has badly trailed those of its peers since July 2006, when its shares began sliding in value. On Mar. 29, Sprint's shares closed down 1¢, or 0.26%, at 3.79.

To lure customers while keeping current ones loyal, Sprint has recently issued a flurry of announcements about its 4G capabilities. On Mar. 23 at the wireless trade show in Las Vegas, Sprint unveiled the EVO, a smartphone made by Taiwanese manufacturer HTC that will be the first in the U.S. to access a 4G network. It will be capable of dishing up thousands of videos from Web sites such as Hulu, Google's (GOOG) YouTube, and Blockbuster (BBI) without straining the network.

carriers look to big 4G pipelines

The device joins Sprint's well-received Overdrive 4G mobile data hotspot introduced in January, which lets users connect up to five high-speed devices wirelessly. By the end of 2010, Sprint hopes to build a network covering 120 million potential customers. Matt Carter, president of Sprint's 4G division, says the faster network bandwidth will pave the way for Sprint to introduce new phones and other products that spark consumers' interest. "The customer is not going to really give a hoot about the technology," he says. "What they're going to care about is: Are we filling their needs and wants?"

Carriers hope the answer is affirmative. The companies are building capacity for 4G networks that use Internet technology to deliver data to users quickly and efficiently. The rapid proliferation of smartphones has created bottlenecks on 3G networks as many users try to get online at the same time. With 4G, operators are creating pipelines for data, based on newer Internet technology that can handle greater information volume.

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