Sprint Nearing Decision Whether To Bid in Incentive Auction, CEO Says
Sprint still hasn't decided whether it will participate in next year’s TV incentive auction, Sprint CEO Marcelo Claure said at a Goldman Sachs financial conference Thursday. But Claure said he sees the value of the 600 MHz spectrum as limited and said it will take years for successful bidders to build out the licenses sold in the auction.
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“We’re in the final analysis in the final decision,” Claure said. “We should be making a decision in the next couple of weeks whether we participate or not. However, to be very clear our current spectrum holdings, which is a combination of 2.5 [GHz], 1.9 [GHz] and 800 [MHz] would allow us to have the best network in the next two years.” The spectrum is unlikely to be cleared by broadcasters before the 2020 or 2021 time frame, he said.
Claure also said Sprint and parent SoftBank miscalculated in thinking they could win easy sign-off on a merger between the company and T-Mobile. The “original plan” when SoftBank CEO Masayoshi Son approved the Japanese company’s buy of a majority stake in Sprint was a possible merger with T-Mobile, he said. Sprint indicated a year ago a deal was no longer in the works (see 1408070044).
“We were very sure that the government was going to approve our deal, but I guess the government sent us some pretty interesting messages that made us say, ‘Hey, we cannot do that deal,’” Claure said. “As Masa has publicly said … he was very disappointed. He felt one of the biggest mistakes was to not truly understand the U.S. regulatory system.”
Son plays an active role at Sprint, Claure said. “He actually runs the network” and is “100 percent hands on,” Claure said. “At the end of the day, the way everybody is going to judge us is were we able to return Sprint to positive cash flow and … Sprint to actually making money,” he said.
Claure emphasized that Sprint has cut its churn rate sharply since he took over as CEO in August 2014. Churn was 2.3 percent and “that’s dangerous territory so we worked real hard in order to lower it to 1.56 percent,” he said. In Sprint’s 19-year history, that's the lowest churn rate ever, he said. Claure also noted that a year ago Sprint was losing almost 10,000 postpaid customers every day. “That’s a big deal,” he said. These “handset” customers are critical to a carrier “because there’s where 85-90 percent of the revenue” comes from, he said. “When you look at it based on 25 million, 27 million post-paid handset customers, you’re losing 10 percent of your customers every year and that’s not a good thing.”
Claure said he's confident Sprint can keep churn rates low. Customers look at three factors when they choose a carrier: the quality of the network, pricing and handsets, he said. Sprint’s network is “getting better dramatically” and Sprint has become a pricing leader, even if the public has been slow to recognize that, he said. “From a handset perspective, I think you’ve seen us innovate.”
Claure said Sprint’s relationship with RadioShack, reopening RadioShack stores as Sprint stores, also has benefited the carrier. “That was an aggressive move, taking a company out of bankruptcy and having the ability to grow” the number of Sprint stores by 1,300 overnight, he said. “That was a monumental task.” The RadioShack buy more than doubled the number of Sprint-branded stores (see 1504090024).