Sprint Chairman Son May Sell Airwaves to Help Fund Turnaround

Sprint Corp. is considering selling some wireless airwaves to help fund its turnaround efforts, at a time when other carriers are spending billions of dollars on spectrum.

Sprint has airwaves that have become “very precious,” according to an interview with Chairman Masayoshi Son. And many companies have asked about potentially buying some of Sprint’s spectrum, said Chief Executive Officer Marcelo Claure.

Since Son’s SoftBank Corp. bought the third-largest U.S. carrier in 2013, Sprint has been in the midst of a turnaround -- one that has accelerated in recent months with job cuts and, above all, promotions to lure new subscribers. The sacrifice has been profits, with losses in four of the last five quarters.

The question is whether Sprint will lean on the value of its airwaves to help fund offset the losses. While Sprint was the only major wireless provider to sit out a record $41.3 billion U.S. airwaves auction, the high demand may have boosted the value of Sprint’s 2.5 gigahertz spectrum to anywhere from $86 billion to $115 billion, according to estimates from Bloomberg Intelligence. That far exceeds Sprint’s entire enterprise value of $48 billion.

“Sprint has a lot of spectrum compared to other companies. In 2.5 gigahertz, it has the biggest bandwidth in the world,” Son said in a phone interview from Tokyo Thursday. “All the new iPhone 6 and other major handsets have 2.5 gigahertz, so suddenly, what was undervalued in people’s view has become very precious.”

Sprint has become a leader in an industry battle with “half-price” offers and cheaper family plans that have taxed its bottom line at a time when it needs to spend billions on store expansion and network improvements. Even as its monthly subscribers rose for the first time in 12 quarters, the company reported its fourth-quarter net loss widened to $2.4 billion.

Selling Airwaves

Sprint CEO Claure said he has resources like selling advanced payments from customers for phones and tapping undrawn credit lines to keep Sprint self-funding. He also said he has received a lot of inquiries about the possibility of selling spectrum.

“We are open minded to business arrangements that could generate long-term shareholder value,” Claure said in the joint phone interview. “But, first and foremost, spectrum is to be used for Sprint, and then we will look at extra spectrum to see if there’s any interest.”

Son faces a difficult decision, said Walt Piecyk, an analyst with BTIG LLC. SoftBank’s initial attraction to Sprint included the 2.5 gigahertz airwaves Sprint acquired with the purchase of Clearwire Corp. The abundance of spectrum combined with SoftBank’s 2.5 gigahertz licenses in Asia gave Son an international technology advantage that other carriers don’t have.

Burning Cash

“Sprint’s burning a lot of cash. If Masa isn’t willing to pony up more capital, selling spectrum might be their only alternative,” Piecyk said. “But by selling it, they enable their competitors and they lose their key point of differentiation.”

Sprint has been barely holding onto the No. 3 spot in the U.S. market as T-Mobile US Inc. has also stepped up its marketing and promotions. Son, who explored a merger of Sprint and T-Mobile last year, reiterated that without greater scale it is difficult for a small carrier to compete in a market dominated by Verizon Communications Inc. and AT&T Inc.

“In this industry, you need scale to have fair competition, otherwise it is a long and tough fight,” he said.

Son, a billionaire with a 300-year plan that includes making SoftBank one of the world’s 10 largest companies, said he hasn’t soured on the U.S. market and would pursue more deals if the regulatory climate was more favorable.

“Anything could happen with me. I may decide to buy Verizon if the government allowed,” Son joked.

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