While Sprint and T-Mobile made headlines this year with their on-again, off-again merger discussions -- now tabled -- Sprint quietly worked with cable operator Altice USA to leverage each other's strengths for the benefit of their customers (and their bottom lines).
Under the multi-year agreement, unveiled on Sunday, Altice USA will use Sprint's network to offer mobile voice and data services within its footprint and Sprint will use Altice USA's broadband infrastructure to more rapidly densify its network. The wireless provider also will earn revenue from any new mobile customers garnered from sales or usage through Altice USA.
Altice USA now can access Sprint's MVNO model; therefore, the cable operator can connect its fiber-based network to the Sprint Nationwide network and control Altice USA's mobile features, functions and customer experience. Altice USA will support Sprint's network densification efforts -- critical to 5G success and bridging the digital divide -- and also leverage its network to help Sprint develop a "differentiated network operating model" in the future, according to the release.
Sprint had spoken to larger cable operators such as Comcast and Charter. Although it has not inked agreements with these providers, it is interested in pursuing similar pacts with other operators, said Sprint Chief Financial Officer Tarek Robbiati in a Monday morning conference call.
"What we wanted was to prove the concept ... from an engineering standpoint and that's why we have undergone these trials with Altice six months ago," he said. "So there's a technical feasibility we wanted to prove which is now proven and there is also a transaction structuring/financial engineering structure that we wanted to crack. We feel we are there now. With respect to the larger companies, anything is possible if the terms are right."
The agreement fits well with Altice USA's WiFi network and desire to leverage Altice's global mobile experience across its footprint of 4.9 million residential and business customers in the US, said Altice USA Chairman & CEO Dexter Goei, in a statement.
Although Altice USA is restricted to selling Sprint services within its footprint, the cable operator is expanding and the partners hope the ability to offer wireless helps Altice USA's expansion efforts, said Robbiati. There are no restrictions on Sprint's ability to sell Magic Box, its all-wireless small cell, he added.
Partnering with Altice, Sprint expects densification operational costs will drop.
"With respect to the opex benefits we see in this transaction with Altice, they are really tangible particularly around backhaul. It's really critical that we get access to backhaul -- whether it's wireless backhaul on our own that we already have, the deal doesn't change that -- but now we gain access to a very solid partner to help us in any other type of wired backhaul, whether it's dark fiber, whether it's fast Ethernet, whether it's [hybrid-fiber coax]. This is very potent for Sprint," said Robbiati.
"This transaction is a pretty interesting, creative transaction but it will not deliver the tens of billions of dollars of synergies that we had foreseen with a merger with T-Mo," he added. "Nonetheless it does deliver real value for Sprint ... and there are intangibles attached to it, one of which is very difficult to put a value tag on, which is the speed at which we can deploy and densify our network in a particular market."
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