(AAPL) Spectrum: A Wireless Game Changer

The present wireless market is ready for the incipient boom in the wireless data space with expanding broadband services. Data traffic is growing in leaps and bounds and has more than doubled over the last three years.

As a result, U.S. carriers are finding it increasingly difficult to manage rising mobile data traffic. The situation becomes even worse with the growing popularity of Apple Inc.’s (AAPL) iPhone and Google Inc.’s (GOOG) Android smartphones. Stiff competitive pressure and limited wireless spectrum licenses add to the difficulties.

The carriers are in need of additional airwaves to expand their high-speed services and support 4G Long-Term Evolution (LTE) mobile broadband services. As a result, the wireless industry in 2012 is intent on tapping unused spectrum to expand their capacity.

Sprint Nextel Corp. (S), which is in the midst of a multibillion-dollar network upgrade, may strike a deal to acquire wireless spectrum licenses from satellite TV provider Dish Network Corp. (DISH) sometime in the near future. Under the deal, Dish could provide wireless services using the Sprint network and its spectrum.

After focusing for several years on cost containment and business stabilization, Sprint is slowly turning around its post-paid wireless business. This in-vogue business is expected to benefit from increased penetration of smartphones, rising average revenue per user and lower churn.

Dish had previously disclosed its willingness to partner with wireless operators like Sprint. It is seeking regulatory approval to build cellular networks using the $3 billion airwaves bought earlier. Alternatively, Sprint can participate in the U.S. government auction for the purchase of spectrum.

Sprint, the third-largest U.S. wireless carrier, is in need of additional spectrums, which could improve its competitive position vis-a-vis its larger rivals AT&T Inc. (T) and Verizon Communications (VZ).

The second-largest U.S. mobile service provider, AT&T recently bought $1.93 billion mobile television spectrum licenses from the U.S. chipmaker Qualcomm Inc. (QCOM).

In December last year, Verizon proposed to buy wireless spectrum from a group of cable companies, including Comcast Corp. (CMCSA), Time Warner Cable (TWC) and Bright House Networks, for $3.6 billion, and radio-spectrum licenses from the privately held cable operator Cox Communications Inc. for $315 million. However, Verizon is facing stiff opposition for these spectrum, especially from T-Mobile, MetroPCS Communications Inc. (PCS) and ten other public interest groups.

Spectrum purchase has thus become a moot point for these wireless operators and we will be carefully watching how it all unravels going ahead. As such, we are currently maintaining our long-term Neutral recommendation on Sprint, AT&T and Verizon. For the short term, the stocks retain the Zacks #3 Rank (Hold).
APPLE INC (AAPL): Free Stock Analysis Report

COMCAST CORP A (CMCSA): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

GOOGLE INC-CL A (GOOG): Free Stock Analysis Report

METROPCS COMMUN (PCS): Free Stock Analysis Report

QUALCOMM INC (QCOM): Free Stock Analysis Report

SPRINT NEXTEL (S): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

TIME WARNER CAB (TWC): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

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