Sprint Might Build LTE Network, Merge With T-Mobile

Jul 13, 2010 (05:07 AM EDT)

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Speaking to the Financial Times, Dan Hesse indicated that Sprint may build an LTE network. Sprint is in the middle of building out a WiMax network with business partner Clearwire. The two companies have launched in 43 markets around the U.S., and plan to cover about 120 million people by the end of the year. Why, then, would Sprint switch to LTE?

Well, lots of reasons.

First, LTE is the 4G networking technology that nearly ever other major wireless provider around the world has chosen as their next-generation network. That includes Sprint's competitors in the U.S., AT&T and Verizon Wireless, among several others. When it comes to technology like this, it will probably be better for Sprint (and its customers) for it to offer the same tech that its competitors do rather than something different.

Sticking with WiMax could eventually put Sprint at a disadvantage. Many might agree that the CDMA versus GSM tech battle that has divided U.S. phone companies hasn't benefited everyone. WiMax versus LTE could have the same negative impact.

Second, Sprint has the spectrum and capacity to roll out LTE. Hesse said in his interview with FT, "We have the spectrum resources where we could add LTE if we choose to do that, on top of the WiMAX network. The beauty of having a lot of spectrum is we have a lot of flexibility." Spectrum is key, and something that Sprint is lush with.

Last, Clearwire, Sprint's WiMax partner in crime, has also hinted that it might switch to LTE in the future should it become necessary. WiMax and LTE share a lot of similarities, and the switchover wouldn't be all that difficult or expensive to manage. If both companies are already sort of agreeing on the switch -- at least in theory -- that will make things easier should Sprint decide to move forward with LTE.

Speaking of expenses, however, here's where the "but" comes in. Sprint is already operating three networks: CDMA, iDEN, and WiMax. The very last thing that Sprint needs to do is begin operating a fourth. I don't think its shareholders would go for it, and who knows if Sprint's bottom line can actually handle such an expense. It's integration of Nextel's iDEN network, which it purchased in 2005, is widely viewed as a failure.

This is probably where a merger with T-Mobile would make some sense. It has been talked about before as an option for both Sprint and T-Mobile, which are both losing customers to larger rivals AT&T and Verizon Wireless. T-Mobile was recently picked as one of ten brands that "will die in 2010." Hesse said there's "logic" in the idea.

If the two companies settle on LTE for their 4G networks, there would finally be some common ground for the them to stand on as one. Right now, T-Mobile uses GSM-based technology for its voice and data network, which is incompatible with Sprint's CDMA voice/data network. LTE would be necessary to make any sort of marriage work.

The Financial Times notes that T-Mobile doesn't have the spectrum resources to build an LTE network. Without a clear 4G path, T-Mobile is in a lurch and needs to come up with a solution. A merger with Sprint might be what saves both firms.