A couple posts ago I shared the idea of Apple buying T-Mobile. What would really be an act of charity would be Google buying Sprint. Talk about putting a company out of its misery. Shares of Sprint have been falling for six months and this company needs a parachute. It waged a successful legal/regulatory campaign against the AT&T,T-Mobile merger, but looks like it may be in need of some help itself.

Here is a quote from an analysis by Morningstar:

“We believe this strategy is correct, but execution has failed thus far in one critical area: financing. That Sprint needs to raise capital isn’t a surprise, given the steady debt maturities it faces during the next few years. Sprint’s initial reluctance to clearly lay out its funding needs and continued uncertainty around Clearwire CLWR have caused the market to lose faith in management. Backed into a corner, the firm was forced to accept costly terms on its recent $4 billion debt offering. Sprint should now have the financial resources to work through Network Vision, but the firm still has little room for error.”

Google definitely has resources and could be Sprint’s white knight. In addition, keeping Sprint viable is good for public policy reasons because it keeps another choice for mobile broadband access in the game.

Spectrum is a nonrivalrous, excludable good. Like any other wireless carrier, Sprint’s cell towers, cell phones, heck even their customers generate that electromagnetic field we call spectrum. Just like Sprint bids for access to spectrum from the Federal Communications Commission, we “bid”, usually on a monthly basis, for access to Sprint’s cell towers.

Our little hand held radios that we call cell phones and smart phones emit signals that eventually clog the highways and channels we refer to as frequencies. The greater the demand to access spectrum, the greater the cost to use it.

Sprint, like every other carrier, faces not just a spectrum crunch, but a cash crunch. Telling investors that roaming agreements are its best bet to conserving cash should put investors on edge. Also buying 30 million smart phones when your network isn’t ready for all that capacity doesn’t set well with me either.

I also have to wonder how Clearwire’s spectrum squatting is impacting Sprint’s decision to rely more on roaming agreements to service its customers versus building out its network? According to Sprint’s 10-K, Sprint has a wholesale agreement with Clearwire where Sprint resells Clearwire’s 4G service. Maybe Clearwire hasn’t built out to the areas where Sprint is relying on roaming agreements or Clearwire wants more money. I don’t know.

I do know that investing in your network and building it out puts your subscribers at ease. They do care that the carrier who says they are providing national service is the carrier that is actually carrying their national service.

Sprint acting more like a regional carrier

Sprint and AT&T are at it again. AT&T is calling out Sprint on the Kansas City-based carrier’s use of roaming agreements versus building out a network to provide consumers with real facility-based services. Sprint alleges this is good for consumers because the practice allows the company to provide its nationwide service..

Sprint calls this good for consumers? When a consumer purchases the service of a national carrier, the consumer wants the certainty of knowing that her service is being provided point to point by the network of the wireless carrier to whom the consumer forks over its money. What Sprint is doing inefficiently pricing its services if that is the case.

Worse yet, this may also be indicative of Sprint’s continuous poor management; buying 30 million iPhones it apparently can’t build a network out to service the phones on. Hard to believe the FCC considers what Sprint is doing as optimal use of a scarce resource.

Is it really good for consumers and investors that a wireless carrier of Sprint’s size and stature is mismanaging itself into becoming a regional carrier?

A great post (as usual) from the crew at The Motley Fool describing T-Mobile’s preference for a little Federal Communications Commission interference in auctions. T-Mobile would like the FCC to be able to manage the auction of broadcast station spectrum in a way that allows the regulatory agency to determine who would be eligible to bid on spectrum. In short, under a preferred FCC scheme, the FCC could tell Verizon or AT&T to go away.
It sounds like the FCC would like to determine a new class of eligible or designated entities; a class that does not include large players like AT&T and Verizon.

If there are any changes in the rules, the changes should be made to strengthen and make clear the word “competitive”. Competitive means being able to take your capital and leveraging and moving it to activities that provide it the highest returns.

The FCC should be leveraging its authority to grant access to spectrum the same way. It should ensure that any technically proficient carrier be able to bid for and receive a license to provide wireless services.

Discriminating against wireless carriers that happen to be owned by landline carriers (an approach Sprint seems to endorse) should not be a policy that the FCC promotes.

Yahoo! News has an article on Deutsche Telekom’s dilemma regarding its T-Mobile USA unit. It appears that even with $3 billion and a billion dollars worth of spectrum, Deutsche will have a hard time making T-Mobile a viable provider of 4G services.

While the big boys, AT&T and Verizon build out their 4G LTE platforms, T-Mobile is not expected to afford the construction of its own LTE network. A partnership with AT&T would have been nice, but the allegedly forward looking U.S. Department of Justice nixed that piece of solid business judgment in the bud.

With Sprint mismanaging itself into a second tier regional carrier, and T-Mobile resigning itself to quasi 4G status, a weakened oligopoly is starting to show itself. Looks like all we have done is jacked up the transactions costs for getting us to a duopoly.

What type of restructure in our regulatory institutions would be necessary for avoiding this type of waste in the future?