Analysis: Sprint network upgrade may curb unlimited data (Reuters)

NEW YORK (Reuters) ? Sprint Nextel may be forced to abandon the biggest advantage it has over its rivals -- unlimited data services for a flat fee -- because of heavy data users and a shortage of wireless airwaves.

Moreover, the increasing likelihood that AT&T's plan to buy T-Mobile USA, the nation's fourth-largest mobile operator, will fail may have the paradoxical result of making Sprint's position even more untenable, according to analysts who follow all three companies.

Sprint, the nation's third-largest mobile service provider, is planning to upgrade its network with the latest mobile standard, Long Term Evolution. But it is launching that service with only half the wireless airwaves bigger rivals Verizon Wireless and AT&T Inc have assigned, leading experts to suggest that the popularity of Sprint's unlimited data plan could put a strain on the network or slow down Web surfing speeds.

Sprint has assigned just 10 megahertz of spectrum for the launch compared with its rivals' 20 megahertz, analysts say. It will have to reassign airwaves being used for other services in order to expand its capacity for LTE.

Unlike AT&T and Verizon, which cap data use to stem overcapacity issues brought on by heavy users, Sprint is the only big U.S. carrier still selling unlimited data for a flat fee to users of smartphones, including the Apple Inc iPhone, on its current network.

"It's a very bare-bones implementation of LTE," said Tolaga Research analyst Phil Marshall. "The risk is, if you don't have headroom as your LTE subscriber base grows, then the speeds will go down."

In that situation, Marshall does not see Sprint being able to continue to offer unlimited services.

"Unlimited is going to kill them," he said. "I think they're going to have to back off from the all-you-can-eat plan."

Unlimited data is a strong selling point for Sprint, which has been struggling for years to retain customers. For Sprint to keep the marketing advantage it has over rivals, one option could be for it to institute usage caps that are considerably higher than those of its competitors.

"That's a lever they can play if they run into being constrained," said an industry source who asked not to be named due to a lack of authorization to speak publicly. "It's inevitable that they will eventually have to put caps (on their data use)."

SPRINT: NO HEADACHE

Sprint, which is spending $7 billion to upgrade its network to LTE by the end of 2013, says concerns about its capacity are overblown, arguing that advanced technology allows it to make the most of its spectrum resources. Bob Azzi, a Sprint executive in charge of the company's network, said the company's plans assume that it will keep its unlimited data service during the LTE rollout.

"I don't consider it a headache," he told Reuters, "We have a good understanding of the nature of those plans and what they do."

Azzi added that the section of the 1,900 megahertz spectrum band Sprint has set aside for LTE is currently unused. He also plans to reallocate spectrum in its 800 megahertz band to use for the high-speed service by early 2014, provided it can secure regulatory approval to do so. That spectrum is currently being used by the aging iDen service Sprint hopes to shut down in mid-2013.

Sprint is also in talks with Clearwire Corp, its majority-owned venture, about expanding their partnership to cover LTE. Sprint currently depends on Clearwire's network for its fastest service based on WiMax technology, and the latest talks are aimed at allowing it to piggyback on Clearwire's LTE to help it boost capacity in the "hottest of hotspots" by 2014 when Azzi says Sprint will need more capacity.

But the future of Sprint's tempestuous relationship with Clearwire is murky since it is not yet certain if Clearwire will raise the roughly $1 billion in new funding it needs to upgrade its network to LTE.

Clearwire lost one-third of its value after Sprint said on October 7 that a bankruptcy filing by the company could be "constructive." Clearwire shareholders again fled on November 18 after the company said it may skip a debt interest payment due December 1. Many analysts saw that pronouncement as a negotiating tactic to try to force Sprint's hand into an agreement with favorable terms for Clearwire.

SOAP OPERA

One investment manager described the Clearwire/Sprint relationship as a "soap opera" that will end with an agreement because they are both heavily dependent on each other.

"In the short term Sprint doesn't need them beyond (WiMax) but they do need them later," said the manager, who asked not to be named.

Even if Sprint and Clearwire reach an agreement, however, Bernstein analyst Craig Moffett is skeptical about how much it would help because of the frequency Clearwire's spectrum is on, which he said causes signal problems within buildings.

"Now that the person next to you at the conference table is surfing away on Verizon ... the shortcomings of Clearwire become painfully apparent," Moffett said.

Moffett also noted that even if Clearwire upgrades its network, it will still have coverage for only about one-third of the U.S. population because it would need to raise a lot more funding than it is currently seeking to extend its network into new markets.

Since Sprint has already had to tap capital markets for $4 billion in debt and needs up to $3 billion more in funding for its own network upgrade, analysts are skeptical it can come up with the money to help Clearwire expand further.

"What are you going to do with the (rest) of the United States? You can't just limp around on one leg," said Moffett, who has a "hold" rating on Sprint due to the uncertainty around its strategy.

The uncertainty around AT&T's deal for T-Mobile USA is another big wrinkle in the Sprint story. On Thursday, AT&T withdrew its application for deal approval with the Federal Communications Commission, saying that it would focus on its legal battle with the Department of Justice. If that deal is approved, it leaves Sprint as a distant No. 4. But if it is blocked, as many analysts now expect, T-Mobile USA may look for another partner, according to the investment manager.

Instead of forging a deal with Clearwire or Sprint, Moffett suggested that T-Mobile USA would instead turn to U.S. cable operators such as Comcast Corp and Time Warner Cable. Some investors had hoped these companies would come to Sprint's aid as they are part-owners in Clearwire. But since the cable operators have unused spectrum in the same band as T-Mobile USA, Moffett suggested that the cable providers would instead create a partnership with that company if it has to abandon the AT&T deal.

Sprint has loudly opposed the AT&T/T-Mobile USA deal, a position that Moffett said was against its best interests.

"Now Sprint loses its logical partners in the cable operators," said Moffett, who described a potential cable/T-Mobile deal as a "match made in heaven."

Moreover, some analysts said that the $6 billion breakup package AT&T will have to pay T-Mobile if the deal fails would make T-Mobile into a more formidable rival to Sprint in the market for cost-conscious mobile consumers.

The uncertainty means that Sprint does not "know exactly how desperate they are at any given point in time," the investment manager said, noting that Sprint's $2.38 share price speaks volumes about investor confidence in the operator's strategy.

"It shows there's not a whole lot of faith out there that they'll be able to successfully execute on these things," this person said.

(Reporting by Sinead Carew; editing by Peter Lauria and Matthew Lewis)

Source: http://us.rd.yahoo.com/dailynews/rss/personaltech/*http%3A//news.yahoo.com/s/nm/20111127/wr_nm/us_sprint4g

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Hungary says Moody's downgrade 'financial attack' (AP)

BUDAPEST, Hungary ? Hungary has slammed Moody's decision to downgrade its credit rating to junk status, describing it Friday as another unjustified financial attack against the country.

Hungary, which last week asked the International Monetary Fund and the European Union for possible financial help, is feeling the fallout from the debt crisis in the 17-country eurozone, even though it does not use the euro. Its economy has not grown as much as hoped and its debt burden remains relatively high.

Late Thursday, Moody's, one of the three major international credit rating agencies, cut its view on Hungary's government bonds by one notch, from Baa3 to Ba1 and maintained its negative outlook. The move to junk status could mean that Hungary will find it increasingly difficult to borrow in money markets as well as having to pay a higher premium.

The country's finance ministry was furious at the decision.

"It has no basis because, despite all the external difficulties, in the past year and a half there has been an expressly favorable change in most areas of the Hungarian economy," the ministry said Friday.

Illustrating its point, the ministry mentioned Hungary's current account surplus, the falling budget deficit, a significant cut to state debt levels and economic growth, which exceeded the European Union average in the third quarter of the year.

Even without the downgrade, Hungary is going to have to confront a number of difficulties next year as many of the economies of the eurozone ? the country's main export markets ? look headed for a recession in the wake of the crippling debt crisis and doubts persist over the effectiveness of the government's economic policies.

The agency cited questions over the Hungarian government's ability to meet its debt reduction targets as well as the country's vulnerability to external shocks as reasons for the downgrade.

It also noted that foreign investors hold 64 percent of Hungary's bonds, of which two-thirds are denominated in foreign currencies. A weaker forint, Hungary's currency, makes it more expensive for the government to pay back its foreign-currency debts.

Moody's, which first awarded Hungary an investment-grade rating in 1996, said a further downgrade could come if "there is a significant decline in government financial strength due to a lack of progress on structural reforms. However, it said the rating could stabilize if there were "a more consistent implementation" of planned reforms.

The downgrade did not prove much of a surprise, though yields on Hungarian debt crept upward and the forint weakened against the euro. Early Friday, the forint fell to 316.60 per euro, 1.7 percent weaker than its opening rate.

Just hours before Moody's announcement, rival Standard and Poor's said it would wait for developments in upcoming talks between Hungary and the IMF and the EU before making a decision on the rating. S&P also has Hungary's rating on so-called "negative watch."

Last week, Hungary's government said it would seek a financial "safety net" from the IMF and the EU, but no new loans, in an effort to improve investor sentiment and protect itself against the spiraling eurozone debt crisis. In late 2008, Hungary became the first EU country to receive an IMF-led bailout, getting a euro20-billion standby loan to avoid defaulting on its debts.

The move marked a reverse in policy. Only last year, Prime Minister Viktor Orban decided to break away from the IMF, preferring instead to make Hungary finance itself. This blocked the IMF's direct influence on Hungary's economic policy and gave the government a free hand to experiment with unorthodox approaches.

To avoid unpopular austerity measures, the government introduced windfall taxes on the energy, banking and other sectors, nationalized some $14 billion in assets managed by private pension funds and allowed indebted households to repay mortgages in foreign currencies at exchanges rates far below market values.

"Hungary will have to accept any dictate the IMF may have, there is no room to negotiate," said analyst Gabor Ambrus of London's 4Cast after the Moody's announcement. "The government will have to make another U-turn."

Source: http://us.rd.yahoo.com/dailynews/rss/europe/*http%3A//news.yahoo.com/s/ap/20111125/ap_on_bi_ge/eu_hungary_downgrade

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