Sprint Headed for LTE; T-Mobile Merger Talk Resurfaces

The 4G landscape gets curiouser and curiouser: Dan Hesse, CEO at WiMAX champion Sprint-Nextel Corp. has reconfirmed his previous statements that the carrier would consider a switch to LTE technology if the move proved prudent; this in the wake of the news that the HTC Evo 4G handset volumes were simply so low as to possibly hamper Sprints WiMAX plans entirely. Now, it appears that a potential LTE-tastic tie-up with T-Mobile USA could be in the works yes, its another resurfacing of that old saw.
Thats a whole lot of 4G shakeups in a 24-hour period, if you ask us. And the implications for U.S. wireless competition as well as LTE device availability are well worth considering should this scenario roll out as rumored.

To date, Sprint was able to sell only 300,000 units of the Evo before running into shortages, estimates Macquarie Group. This week HTC said the holdup for shipping more is getting large-touch displays from Samsung its the same component thats leading to shortages of Verizon Wireless Droid Incredible. While Samsung is spending $2.2 billion to ramp up production with more factory power, fruit of that investment wont start rolling off the presses, as it were, until 2012. While laptops and dongles can, attractively, take advantage of WiMAXs higher speeds, its the handset game thats expected to be a differentiator for LTE when AT&T Inc., Verizon Wireless and others start turning up those networks in the coming months. In fact, Samsung already has an LTE phone ready for Q4 thats bound for the Metro PCS network in Las Vegas at launch.

All of that translates to Sprint losing its first-mover momentum in the 4G space, hampered by device availability. The early move to 4G has benefited Sprint from a marketing perspective, but it hasnt really proven out in a major way in subscriber growth, said Dan Hays, telecom partner at PRTM.

“We thought we would have more of a head start than we’ll end up having,” Hesse told the Wall Street Journal. “Because of the recession last year, general high-tech capacity was taken offline and now it needs to be brought back up.”

Any decision to move to LTE for new builds could solve part of this conundrum while contributing to LTE economies of scale (and therefore, more device availability). It would also harmonize North America to a common, global standard good news for roaming and service interop despite frequency variances among carriers. Sprint earlier this year admitted that it was doing a technology evaluation, sending out RFPs for LTE to be better able to weigh its options.

In an interview with the Financial Times, Hesse this week embraced the idea and intimated that an LTE announcement was imminent. He also noted that Sprint has plenty of spectrum to support its existing WiMAX footprint as well as an LTE build. He also acknowledged that the idea of a merger with the LTE-supporting T-Mobile would make sense: T-Mobile needs spectrum and footprint to build out LTE; Sprint has it. Sprint could use all those young data-users that T-Mobile supports, plus the marketing expertise. T-Mobile gains a business user story. Etc. Together they also would be better able to compete with their larger rivals. That has sparked off a firestorm of speculation (again) that the two are headed to the altar. However, Hesse did not comment further, but neither did he deny that talks were in the works.

Such consolidation would, however, whittle down what is already an arguably small amount of nationwide wireless competition in the market. One path to challenge this issue would be wholesale plans; Verizon for its part has already said it would offer LTE resale and leasing to rural carriers. Sprint is wholesale-friendly already; it owns 51 percent of WiMAX operator Clearwire Corp., whose business model is significantly based on taking on MVNOs. This could also lay open the path for the FCC to auction off the D-block 4G-ready nationwide public safety spectrum with a new national entrant requirement.

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