Sprint announced yesterday that it plans to sell an estimated 3,300 of its cell towers to TowerCo, a communications holding company, and then subsequently enter long-term leasing agreements to regain usage of the towers.  Through the arrangement, Sprint will raise an estimated $670 million in cash to help subsidize the debt it has amassed to the tune of $19.5 billion.

Sprint’s new Chief Executive, Dan Hesse, in his aggressive turn-around plan for the company plans to use the funds to increase liquidity and increase its flexibility as it plans to re-coup some of the nearly 1 million subscribers the company lost during the first quarter of this year, according to the Kansas City Star. 

Earlier this year, Sprint executives said they intended to sell noncore assets, cut costs and try to reduce some of the massive amount of debt its amassed in light of the company’s trend of declining adjusted earnings.  “This is part of that effort,” said James Fisher, a Sprint spokesman. “Our core business is not operating towers. Our core business is providing cutting-edge wireless products and services.”

Sprint doesn’t seem to be alone in its plan to start selling off some of its owned cell towers in an effort to reduce costs.  Other big players in the US have also traded their owned towers in favor of leasing them instead.  I would venture to guess the reason for this is the fact that they would much rather pay a simple leasing fee to a third-party in lieu of forking out the massive costs associated with running and maintaining such a vast network of towers.  Sprint alone utilizes over 65,000 cell towers across the country to support its services. 

The company has announced the deal should be final within 90 days, and that its already secured agreements with TowerCo to support all of the new services being launched by Sprint in the near future, including its upcoming WiMax network. 

It’s going to take a lot more than simply cutting costs to take a chunk out of that massive, nearly $20 billion debt.  That coupled with growing pressure from the top two carriers in the US; AT&T and Verizon respectively, which have both been adding subscribers by the millions this year compared to Sprint which has lost about that many during the same time. 

The idea of CDMA mobile technology is slowly becoming antiquated when compared to GSM version from its counterparts, which I believe to be one of Sprint’s largest shortcomings.  On the other hand, Verizon, which sports CDMA as well is still sitting in the number two spot behind AT&T gaining subscribers at a reasonable rate, so that theory might be moot.  Maybe it’s just simply a fact of using an outdated network that can’t compete with the others.  One thing’s for sure, NEXTEL isn’t helping its cause at all.  With outdated technology as well, I would see it as dead weight in need of trimming. 

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Entry was posted on Thursday, July 24th, 2008 at 5:52 pm under Cell phones.

Read more entries by Justin Montgomery.
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