Will the LTE Revolution Leave a Few Carriers in the Dust?

Sprint (NYSE:S) and AT&T (NYSE:T) are lagging behind Verizon (NYSE:VZ) in their LTE network rollouts. LTE, or ‘long-term evolution’, a new wireless standard that enables very fast web access, is featured by Verizon in 230 markets — a footprint across two-thirds of the country. In contrast, AT&T covers only 35 markets and 25 percent of the population, though it plans to have complete national coverage by the end of 2013. Sprint is further behind, with no LTE service yet in place, and a plan to cover only six cities by the middle of next year.

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Yet, smartphone manufacturers are briskly rolling out LTE compatible handsets, with Apple likely launching an LTE capable iPhone sometime later this year after including the technology in its newest iPad model, released in March. Where does this place the carriers, who are eager to market these phones, yet do not have the networks in place?

AT&T has a solution for the interregnum until full rollout: It beefed up its existing HSPA+ network and made it fast enough to be dubbed ‘4G’. Mark Siegel, a spokesman for Dallas-based AT&T, said: “The big advantage for our customers is that if they fall out of LTE service we have 4G covering over 260 million people.”

Sprint, it appears, is between a rock and a hard place — with over $8 billion in losses incurred during the past three years, it may find it difficult to fund the capex for an extensive LTE rollout. Sprint’s resulting handicap is described well by Robert Jaeger, independent telecom analyst: “They’ll be at a disadvantage versus the big two. They can’t afford to be that far behind since their new subscriber momentum is going to be key to start getting to profitability.”

Yet Sprint shrugs it off, claiming it is a past master at selling phones even in the midst of a network build. “We have been through this before,” CEO Dan Hesse said in an interview. “We are extremely experienced at it. We know exactly what it means to launch a 4G device early, as you are in the middle of a rollout.”

In the midst of all this, what of the consumer?

“If they let consumers know about the situation upfront then it’s not so bad,” says Parul Desai, policy counsel for the Consumers Union in Washington. “I am more concerned about new phone buyers who decide on a two-year contract and don’t get the service for a quarter to half a year.”

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