Pending Sprint Nextel Terminations
In late 2010, Sprint announced in a rather public way that as part of their “Network Vision” plan, they intend to reduce the 68,000 cell sites they currently own by 30,000 over a five-year period as a result of the 2005 merger between Sprint and Nextel. In 2005, Nextel was a sinking ship, with an increasingly antiquated technology, iDEN, that had outlived its useful life. Nextel had substantial spectrum holdings and a strong following from business customers, and Sprint had a strong consumer subscriber base. The iDEN technology limited Nextel’s ability to develop 3rd Generation data services. Furthermore, interference issues with public safety frequencies caused Sprint to work with the FCC to reband the Nextel spectrum holdings to higher frequencies. Sprint, on the other hand, was using (and continues to use) CDMA technology. At that time, they were considering various 3rd Generation data services but lacked the spectrum that Nextel possessed. The merger seemed like a good idea at the time, but it didn’t work out that way. Increasing dissatisfaction with perceived poor customer service and the failed integration of the two networks reduced the value of the company significantly. This created a situation where Sprint-Nextel no longer needed to develop new cell sites, as there was significant overlap between the two networks. As a result, the problems from which other carriers were suffering due to capacity overloads on their networks had less impact on Sprint- Nextel. Rather than add cell sites to handle the excess capacity, they simply shed subscribers, therefore reducing their capacity needs. By many accounts, this merger was one of the worst mergers of the last decade, resulting in Sprint being forced to write off $30 billion dollars in good will in 2008.
The Network Vision plan consists of the following steps:
- Adding LTE equipment to 22,000 sites in the near future
- Keeping CDMA and iDEN sites active for a year or so
- Converting subscribers over to LTE devices
- Turning off the iDEN network in 2013
- Terminating unneeded cell sites
- Removing CDMA equipment when subscribers are using LTE
During their last quarterly earnings call, Sprint announced that it expect to “reduce [its] total tower position by more than 44% from approximately 68,000 towers to 38,000 towers”. What they should have said was that they planned on reducing the number of cell sites – not towers. Sprint doesn’t own 68,000 towers, it owns 68,000 cell sites and it is planning on reducing the number of cell sites to 38,000 total. Sprint believes that their new Network Vision technology will significantly increase the efficiency and capacity of their network, enabling them to reduce fixed and operating expenditures on cell sites.
On the surface, this sounds scarier than it is. Some industry pundits have suggested that 38,000 Nextel leases will be terminated as a result. We don’t believe this is true. There will be a number of Nextel iDEN cell sites terminated simply because they are no longer needed. Thus, if you have a Nextel site, the chances are greater that your site will be terminated. If you have both leases on your tower or rooftop, there is a strong probability that one will be terminated. If you only have one, the probability that you will lose your lease depends upon where the other Sprint/Nextel sites are located in the vicinity.
At this point, there isn’t much that can be done to save your site. Rent concessions aren’t going to mean much to Sprint/Nextel and by offering them to Sprint, you might end up reducing the rent on a lease they intend to keep anyway. If you are being approached to grant approval for site modifications or to add LTE, it is likely that Sprint intends to keep your site. In this case, please review our articles on Cell Site Lease Expansions and on LTE Proposed Modifications.
If you are considering selling your leases, it might be a good time to consider selling your Sprint or Nextel leases, as they won’t be worth much at all after you receive notice of termination. Steel in the Air can assist you with a lease buyout- either in procuring offers for you or helping you determine the value of your cell site lease.
If you have questions about whether Sprint or Nextel has the right to terminate under your lease or need help reviewing whether your contract allows them to make modifications without your consent, the attorneys at Cell Tower Attorney can review your agreement and let you know what you are obligated to do or not do under the lease.