Sprint (NYSE: S) has not yet announced its final plans for its "Next Generation Network" (NGN) network densification, but elements of it are starting to take shape. According to financial analysts who follow the carrier, the NGN program will include around 70,000 small cells, some unknown number of additional macro cell sites and will likely involve wireless backhaul technology using the 2.5 GHz band.

Sprint said last week that its executives plan to discuss the NGN program on the company's next earnings call, which is scheduled for Aug. 4. The company has declined to discuss specific details of the plan before then.

The aim of the NGN project to enhance coverage and capacity and let Sprint deploy Voice over LTE technology. Sprint has bold plans and high expectations for how it intends improve its network, which it insists is getting better every day. Speaking in late May at Re/code's Code Conference, Sprint CEO Marcelo Claure said that "you can expect in the next 18 to 24 months--hopefully you'll invite me two years from now--that our network will be ranked No. 1 or No. 2 in every single market." He later clarified that he meant No. 1 or 2 in the United States' major markets, according to CNET.

According to Wells Fargo analyst Jennifer Fritzsche, Sprint plans to deploy around 70,000 small cells and has struck an agreement with wireless infrastructure firm Mobilitie, which will deploy around 20,000 of the small cells. Mobilitie sold 2,300 towers and some distributed antenna systems (DAS) to SBA Communications in 2012, but still focuses heavily on towers, small cells and DAS.

Evercore ISI analysts Jonathan Schildkraut and Justin Ages wrote in a research note on Monday that the capital budget for the NGN project "included up to 70K small cells as well as several thousand macro sites." They added that "our checks have indicated that in one of the iterations of S's NGN plans, the company had proposed a 70K small cell buildout--which was supposedly won by Mobilitie."

A Mobilitie spokeswoman did not respond to a request for comment.

It's unclear how widespread the small cell deployment will be across the country as well as how many macro cell sites will be involved. Sprint might also look to repurpose decommissioned Clearwire sites for CDMA and LTE service, according to analysts.

Although Mobilitie might be deploying many of the small cells involved in Sprint's NGN, the carrier is likely going to be buying gear and small cells from at least three vendors, according to analysts: AirSpan, Nokia (NYSE:NOK) and Samsung. Nokia and Samsung are two of Sprint's vendors for its tri-band "Spark" LTE service and Nokia is a key supplier of 8T8R radios Sprint has been using for macro coverage. Nokia and Samsung representatives did not respond to quests for comment

AirSpan, a privately held wireless company based in Boca Raton, Fla., which formerly developed WiMAX products, has developed an LTE product that uses 2.5 GHz for both radio access as well as backhaul. AirSpan declined to comment.



Because acquiring fiber for backhaul is prohibitively expensive, Sprint is likely going to use wireless backhaul to save money, analysts said. Both BTIG analyst Walter Piecyk and New Street Research analyst Jonathan Chaplin said that Sprint will likely use in-band wireless backhaul solutions using the lower 2.5 GHz spectrum band that would not require line of sight. Piecyk also wrote in a blog post last week that Sprint could "allocate a chunk of the 2.5 GHz spectrum for backhaul alone, known as out-band."

"Wireless backhaul would facilitate speed to deployment and it appears it could also lower your cost of ownership," Piecyk said in an interview.

"If [Sprint parent] SoftBank is committed to making it work, I'm sure ultimately they will," Chaplin said in an interview. "I'm also sure it's going to cost them a lot more and take them a lot longer to get it right than I think they are suggesting at the moment."

Chaplin said that even if Sprint deploys 70,000 small cells, that might not be enough to improve its network as significantly as it has said it will. "I would have thought they needed to build out significantly more than 70,000 small cells," he said. "If the objective is as [SoftBank CEO and Sprint Chairman] Masa[yoshi Son] has described it, which is to build the best network possible in the country, 70,000 small cells seems like a good place to start."

Chaplin noted that Sprint's Network Vision project modernized 38,000 cell sites, and that if Sprint really wants to improve its network, it should aim to expand coverage to the equivalent of 50,000 macro sites. "The plan would be a lot more plausible to me on the surface if it involved getting to 50,000 macro cells for the core EV-DO/LTE network, and on top of that was going to build a dense small cell network," he said. "They really need to be building those macro sites now and they're not."

How much is all of this going to cost? Sprint CFO Joe Euteneuer said on the company's last earnings conference call in May that Sprint expects capital expenditures to be approximately $5 billion for fiscal 2015, which runs until the end of March 2016, according to a Seeking Alpha transcript of his remarks.



Euteneuer also said that the company has "$1.4 billion in undrawn availability under our network vendor financing to be utilized towards the purchase of 2.5 GHz network equipment."

Additionally, Euteneuer added that Sprint is aiming to be more cost-efficient than it has in the past with vendors. He said in May that "the initial reads of the RFPs is that we're able to get a lot more done for a lot less along with being able to get favorable financing terms ultimately when we decide on what direction we're going in regards to the final capital program."

Claure said that "we recently issued RFPs to various vendors to gather information on specific solutions and pricing and we're very pleased with the significant potential savings we are seeing compared to our Network Vision pricing."

Analysts at Jefferies said the NGN plan could pressure Sprint's free cash flow. "We see the new network densification plan as stop-gap measure to structural issues that will likely only be fixed by a meaningful investment in low- or mid-band spectrum," they wrote in a research note. "We conservatively estimate the plan will cost an incremental [$1 billion to $2 billion] per year on top of run rate wireless capital spending of [$4 billion to $5 billion] for three years. Sprint may find creative ways to involve vendor financing, but the leverage profile only becomes further troubling."

Chaplin said he remains skeptical of Sprint's ability to execute on plans to improve its network. "If they came out with a plan to create the best network in the world and they told us it was going to cost a fair amount of money but the return on investment was going to be very attractive, that would be plausible," he said.

However, Chaplin added: "If they are telling us it's not going to cost a lot of money it's because they are not willing to spend the money it's going to cost. Not because they've found this magic alchemy."

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