Sprint Puts a Few More Dollars Into Wireline

July 26th, 2012 by · 8 Comments

In their earnings report this morning, Sprint rightly put most of the focus on its much larger wireless business, i.e. their progress in the shuttering of Nextel and the rolling out of LTE. Overall, earnings per share were a bit light but revenue was strong and they raised OIBDA guidance for 2012. But the most interesting data point to me was the boost in wireline capex. 

Wireline revenues held nearly steady at $995M, down just $3M sequentially, while adjusted OIBDA fell to $149 for an ajusted OIBDA margin now touching just 15%. But, very interestingly, capex rose rather sharply to $79M for the quarter, higher than during any quarter since Q4 of 2008 and higher as a percentage of revenue than we’ve seen since Q1 of 2008.

This probably reflects progress with Sprint’s recently announced upgrade project, using Ciena’s coherent 40G and 100G technology and with a 400G trial scheduled for early next year.  They must have been at it for some time during Q2 prior to that announcement, of course.

The spending surge finally answers the question of whether Sprint would choose to fish or cut bait when it comes to wireline. After years of managing the business for cash there had been recurring speculation about Sprint’s plans. Would they monetize it and outsource their terrestrial capacity needs, or invest in it as a critical support piece to the wireless business?

The latter is clearly now the case, at least in the short to mid term. Sprint still runs one of the top IP transit backbones, but on mostly older fiber that can only take them so far. While they probably aren’t going to try to re-emerge as the wireline power they once were, it could be now that they have decided to put resources behind it that they look to pick up some intercity dark fiber to supplement the infrastructure – or that they already have.

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Categories: Financials · Internet Backbones · Telecom Equipment

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