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Sprint CEO touts spectrum advantage in race to nationwide mobile 5G

Sprint Corp. CEO Marcelo Claure believes his company will play a leading role in the deployment of next-generation 5G technology. But he emphasized the company will also remain keenly focused on controlling costs.

Speaking during a Feb. 2 earnings conference call, Claure said he sees Sprint as "best positioned to be the first carrier with a nationwide mobile 5G platform" due to its large spectrum holdings, especially in the 2.5 GHz band. The 5G technology will offer speeds that are 100x faster than current 4G speeds, and will rely on a combination of high-band, mid-band and low-band spectrum assets. The deployment of 5G will also include the rollout of thousands of small cells, or cellular base stations and antennas, as well as deep fiber networks.

Since Sprint's spectrum holdings sit in the low- to mid-band range, Claure said Sprint has a great advantage over its competitors, including Verizon Communications Inc. and AT&T Inc., when it comes to deploying 5G.

"Verizon and AT&T talk about a path to 5G, but they're relying on millimeter wave [high-band] spectrum that … will give you superwide channels of capacity but the propagation is limited to a very short distance," Claure said, noting that this will either limit the mobile experience or require AT&T and Verizon to "spend a fortune to massively densify their network to connect the dots."

Sprint's rollout plan, meanwhile, includes increasing its total number of macro tower sites by nearly 20%. Roughly half of Sprint macro sites currently support 2.5 GHz spectrum.

"We have already started on thousands of site upgrades and expect to complete the majority of site upgrades in 2018," Claure said. The company also plans to deploy more than 40,000 outdoor small cells, utilizing its infrastructure sharing agreements with Altice USA Inc. and Cox Communications Inc.

Claure described this as "the biggest network capital program in many years" but noted he sees Sprint's 5G network as being a key differentiator for the company in the future.

"I cannot wait to once and for all be able to sell the product that is best in the industry, with competitive coverage, the fastest speed and the highest capacity," the CEO said.

At the same time, however, Claure noted Sprint will remain focused on controlling its costs. Excluding leased devices, Sprint expects its fiscal 2017 capital expenditures to be near the low end of its guidance of $3.5 billion to $4 billion. And it expects capital expenditures to increase to $5 billion to $6 billion in fiscal 2018.

In terms of operating costs, excluding approximately $100 million of hurricane-related and other nonrecurring charges in the quarter, the company reported approximately $260 million of combined year-over-year reductions in cost of services and selling, general and administrative expenses for third quarter of fiscal 2017, the most recently ended period. Overall, Sprint's year-to-date total reduction in spending is now more than $1 billion.

All in all for the fiscal 2017 third quarter, Sprint reported net income attributable to the company of $7.16 billion, or $1.76 per share, compared to a net loss of $479.0 million, or a loss of 12 cents per share, in the prior-year period.

The company's net income for the most recently ended period included $7.1 billion of noncash benefit from tax reform, resulting from a remeasurement of the company's deferred tax assets and liabilities.

The S&P Capital IQ consensus estimate for the quarter was a loss of 6 cents on a GAAP basis and a loss of 5 cents on a normalized basis.

Revenue for the third quarter was $8.24 billion, down from $8.55 billion in the same period last year. Postpaid net additions for the quarter totaled 256,000, while prepaid net additions were 63,000.