The complex strategy by Sprint is one of several multibillion-dollar bets in recent months by companies including Deutsche Telekom and Dish Network. They are eager to establish a footprint in the world’s most lucrative wireless market, where U.S. consumers show no end to their appetite to watch videos, surf the Web and post photos on social networks over smartphones and tablets.
It’s also the latest step in Sprint’s arduous journey to overcome a massive accumulation of debt and a decline in subscribers. Chief executive Dan Hesse took over five years ago aiming to reverse customer losses and fight off an attempted merger by rivals AT&T and T-Mobile that would have left Sprint little room in the marketplace.
“It was like trying to catch a falling knife,” Hesse said in a recent interview, describing the first five years of his tenure. “Now, we are in a stronger position than ever. Finally.”
The purchase of Kirkland, Wash.-based Clearwire and SoftBank’s acquisition of Sprint are expected to win approval by federal regulators, who will review both deals, analysts said. Sprint is buying the remaining 49 percent of Clearwire that it doesn’t already own, which gives it full control of the company’s nationwide spectrum.
The Federal Communications Commission and the Justice Department have signaled a desire to bolster smaller rivals of AT&T and Verizon Wireless, the two giants that together control 70 percent of the market. Sprint and T-Mobile are positioned as lower-cost alternatives to the bigger firms.
Sprint continues to face massive challenges, analysts say. Even with an infusion of money from SoftBank, Sprint will have less cash and more debt than its high-powered rivals. AT&T and Verizon already have their 4G networks up and running in many major U.S. cities. Most customers are already committed to a carrier, which means Sprint would have to steal away subscribers through promises of lower prices. It made a $15 billion deal with Apple to carry the iPhone, a bet that some analysts doubt is worth the payoff.
“It’s still going to be a tough row to hoe,” said Jeffrey Silva, an analyst at Medley Global Advisors. “Sprint is better-positioned now than they have been in many years, but it’s really hard to make great leaps in the wireless market because it is saturated at this point.”
It’s a dramatic turn of events for a company that as recently as spring 2011 was treading close to collapse.
In March of that year, Hesse was in an Orlando hotel room, pacing the floor as he rehearsed a keynote speech for the wireless industry’s annual conference, when he received a call that would throw his company back into tumult.