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Policy


Sprint Nextel’s rebanding price tag continues to increase

Sprint Nextel’s rebanding price tag continues to increase

Wireless carrier Sprint Nextel spent $1.8 billion on spectrum reconfiguration related to 800 MHz rebanding through 2008 and projects it will spend $3.2 billion to $3.6 billion by the time the massive effort is complete, the company said in an annual regulatory filing released last week.
  • Written by Urgent Communications Administrator
  • 2nd March 2009

Wireless carrier Sprint Nextel spent $1.8 billion on spectrum reconfiguration related to 800 MHz rebanding through 2008 and projects it will spend $3.2 billion to $3.6 billion by the time the massive effort is complete, the company said in an annual regulatory filing released last week.

Sprint Nextel released the figures in its 10-K filing with the Securities and Exchange Commission (SEC). The $1.8 billion spent on rebanding represents a $500 million increase since the company released its 10-K a year ago. In that annual report, the carrier estimated that its total rebanding costs would be between $2.7 billion and $3.4 billion.

During the company’s quarterly conference call last month, Sprint Nextel CFO Bob Brust said the company is spending between $200 million and $300 million per quarter on spectrum reconfiguration.

Under the FCC’s rebanding order in 2004, Sprint Nextel was obligated to pay all rebanding costs or $2.8 billion, whichever figure is higher. At the time, there was hope that $2.8 billion would be more than enough to cover the cost of rebanding, meaning that any excess money could be deposited in the U.S. Treasury. With Sprint Nextel’s lower-cost estimate now at $3.2 billion, the company said it is “unlikely” to make payment to the U.S. Treasury.

Sprint Nextel said its current estimated cost of rebanding is based on “our experience to date with the reconfiguration program and on information currently available.” In the filing, the carrier acknowledges that the estimate is based on “significant assumptions” regarding the rebanding costs along the U.S.-Canadian border—a process that is just getting started in earnest—and along the U.S.-Mexico border, where licensees are still waiting for the governments to reach an agreement that will allow rebanding to begin.

Furthermore, the cost figures only include Sprint Nextel’s costs that are directly attributable to spectrum reconfiguration. These numbers do not include “any of our internal network costs that we have preliminarily allocated to the reconfiguration program for capacity sites and modifications for which we may request credit under the reconfiguration program,” the SEC filing states.

Wall Street probably has not factored in the cost of rebanding when evaluating Sprint Nextel, but the fact that the carrier expects to pay several hundred millions more in the reconfiguration than originally expected is notable, said mobile wireless consultant Andrew Seybold.

“That’s a lot of jobs or whatever,” Seybold said during an interview with Urgent Communications. “The federal government doesn’t think that a billion dollars is a lot of money, but to a company like Sprint that’s struggling, it certainly is.”

In addition, rebanding also limits Sprint Nextel’s flexibility moving forward, Seybold said.

“There’s no way they’re going to get rid of Nextel until rebanding is done—I don’t know of anybody who would be interested in it with rebanding going on,” he said.

Tags: content Policy Rebanding Wireless Networks

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