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Sprint CEO Promises Network Upgrades Won't Cause Disruption

Claure reiterated his goal to improve Sprint's network quality even as the No. 4 U.S. carrier cuts costs.

Asa Mathat for Re/code

Sprint CEO Marcelo Claure said Tuesday that the company’s planned network improvement effort won’t result in the service disruptions that have plagued the company in the past.

“This is not a rip-and-replace strategy,” Claure said on a conference call with analysts, promising a “progressive build” that will see customer experiences only improve.

Sprint declined to comment in detail on its network plans, but denied part of a Re/code story from earlier this month that it would rapidly replace existing towers. The company said it is not currently exiting any of its tower leases; Network chief John Saw said Sprint is “well aware” of its contractual commitments to traditional tower companies, which he said will continue to be strategic partners over time. However, he declined to say how many of its existing tower leases Sprint plans to renew, adding that the company will look at less costly alternatives.

“It’s too early to speculate what we will do,” Saw said.

Re/code reported earlier this month that Sprint is working with upstart networking company Mobilitie on an unorthodox network approach that sees the company relying on small cells as well as in-between “mini-macro” towers in an effort to improve quality even as it cuts costs. The company is also looking to reduce the amount it pays rivals AT&T and Verizon to carry data from the towers back to the network, what is known in the industry as backhaul.

Sprint on Tuesday confirmed it plans to make changes in its backhaul strategy to cut costs.

“There’s opportunity in backhaul to reduce our costs,” CFO Tarek Robbiati said on the call. Sprint plans to shift to microwave technology for some backhaul, a technique used by Clearwire, which Sprint acquired a couple years back. For its new small cells, Sprint will also use some of its wireless airwaves to handle backhaul. That means taking away some of the spectrum available for devices, but Saw says Sprint has airwaves to spare.

As for the tower and small cell plans, network chief John Saw acknowledged the company is being somewhat circumspect about its plans. “We will tell you as much as we want to tell you,” he said. “I want to make sure we don’t give our playbook away.”

The executive comments followed the company’s largely upbeat earnings report. Earlier Tuesday, Sprint posted a narrower-than-expected loss and hiked its earnings forecast for the current fiscal year.

Claure and CFO Tarek Robbiati said that the company is eyeing a variety of options of where to place its network gear including placing equipment on rooftops, public right-of-ways and existing poles as well as newly erected poles.

“We are going to do that without jeopardizing the customer experience,” Claure said.

Much of the effort will rely on small cells that Claure said will result in significantly lower capital costs than past network efforts. At the same time, Claure promised that the effort would allow Sprint to reach its goal of “network parity or superiority” over the next two years. Claure has previously said his goal is to be No. 1 or No. 2 in 80 percent of markets.

Shares of the company traded higher on Tuesday following the report, trading recently at 3.00, up 48 cents, or 19 percent.

Claure added in a call with reporters that there aren’t enough towers in the country to deploy all of the small cells Sprint wants to add and said the company will take a hybrid approach that uses a number of different methods. The company has already started putting up small cells, but Claure said Sprint won’t say where or how many, adding that such information would help only its competitors.

Robbiati said that the company’s recent results show it can indeed cut costs and improve its network at the same time.

“That is exactly what we are doing,” he said on the conference call.

The company is also looking at novel ways to finance the network update, adding billions in cash to its business by shifting costs for buying phones and network equipment to separate companies established by corporate parent SoftBank. It is also transferring a “very, very small amount” of spectrum to the network equipment financing company, Robbiati said. “Spectrum is strategic,” he added, saying that Sprint plans to use most of its airwave holdings to serve customers. Sprint later clarified that it will still have access to the spectrum that is being transferred.

Update: On a second conference call with reporters, Claure said that the company has chosen to fight less hard on the prepaid front where T-Mobile’s MetroPCS and AT&T’s Cricket are aggressively courting new customers.

“You’ve got to figure out where do you want to fight and where do you want to grow,” Claure said. “We are keeping the customers that matter.”

In particular, the company is de-emphasizing Virgin Mobile at the moment, having pulled all advertising ahead of introducing a new strategy for that brand. Sprint didn’t go into details on that.

Asked about its relationships with cable companies and the potential of Sprint to partner with a TV provider, Claure said his focus is on turning Sprint’s core business around but said that the company has had conversations with some cable companies interested in getting into the phone business. Sprint already has a large number of deals with other companies that resell its service under their own brand.

“We embrace wholesale relationships,” Claure said. “We continue to view wholesale as very important.”

This article originally appeared on Recode.net.