The move represents a chance for Sprint to eliminate one of its biggest issues: the need to juggle multiple network technologies. As part of the upgrade, the company plans to start phasing out the iDEN network--known for its walkie-talkie function--long used by Nextel, which is expected to account for as much as 40% of the total cost savings. The project also positions it to make a more seamless move into fourth-generation wireless services, beyond tapping partner Clearwire Corp.'s (CLWR) 4G network.
Sprint shares rose nearly 6% to $4.15 after the company announced the highly anticipated project.
"This is very positive," said Jonathan Chaplin, an analyst at Credit Suisse, adding that the company's long-term prospects pick up with the announcement.
He previously estimated the upgrade to add $2 to Sprint's share price, but his estimate called for higher costs and less savings. The company's forecast suggests a significant increase to his estimate, he said.
Sprint plans to start rolling out the upgrades next year, which represents an aggressive schedule, said Daniel Hays, who covers telecom for consulting firm PRTM.
The project will center on replacing Sprint's older network equipment with hardware and software able to handle multiple wireless frequencies and technologies, including its current 3G CDMA network, and Clearwire's 4G WiMax network, as well as a more widely embraced 4G standard called Long-Term Evolution. The network is designed to eventually handle both LTE and WiMax at the same time.
Clearwire remains Sprint's 4G strategy, said Steve Elfman, president of Sprint's network operations business. He added there is an opportunity for Sprint and Clearwire to share their network infrastructure.
For customers, the upgrade will result in better coverage and more services, Elfman said. In particular, he highlighted a new version of a CDMA-based push-to-talk service that would has better reach and more features than the current version. The walkie-talkie-like function is seen as a crucial feature in convincing long-time Nextel uses to make the switch once that network begins to shut down.
While questions remain over how well the company can execute on its plan, Chaplin said that Sprint is using technology already deployed by other carriers, so there are fewer risks of problems.
"You don't have to make a huge leap of faith that they will be able to do this," he said.
The project also represents a significant win for each of the vendors. Elfman said the contracts will be doled out evenly, with each of the which are each responsible for a part of the country.
For Ericsson, it represents an expansion of a managed network contract it won from Sprint a year ago. The new deal is strategically important for Ericsson because it expands the previous relationship and paves the way for further deals with the operator, according to Arun , chief technology officer at Ericsson's North America business.
Samsung, long a phone supplier to vendors, gets its first infrastructure contract win from a U.S. national carrier with the deal.
"This is a significant expansion of our historical relationship," said Tom Jasny, vice president of wireless broadband networks for Samsung's North American arm.
Samsung plans to bring its experience in WiMax to the project, ensuring the other vendors play friendly with the 4G technology.
Alcatel-Lucent will be tasked to upgrade the networks in crucial cities such as New York and Los Angeles.
Wim Sweldens, president of Alcatel-Lucent's wireless networks product division, said North America gives the company an opportunity to showcase its best technology, which eventually makes its way elsewhere in the world. He added the Sprint deal cements its position in the North America market.
Ericsson recently fell 2% to $10.74, Alcatel-Lucent fell 1.4% to $2.91, and Samsung was flat at $294.50.
Copyright © 2010 Dow Jones Newswires
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