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Sprint's Clearwire Offer Raises New Spending Questions

Stocks in this article: S CLWR T VZ AAPL

Sprint continues to see unlimited Apple (AAPL) iPhone data plans as its value proposition to consumers over competitiveness on wireless coverage and service, in the interim.

From a pocketbook perspective, Sprint's unlimited data plans compare favorably to the tiered data plans of AT&T and Verizon; however, consumers need to take a leap of faith on coverage, data speeds and the company's improving financial picture.

Sprint also is in the process of completing Network Vision, a rollout of a nationwide 4G network, but its reported spending plan pales in comparison to AT&T even after the company was effectively recapitalized in a merger with Softbank of Japan.

Earlier in December Moffett highlighted the tension of Sprint's relatively light spending plans in comparison to the likes of industry leaders AT&T and Verizon. The question he raised was whether Sprint would have to reverse course.

In the face of AT&T's options and its comparative financial and network position, Moffett wrote, "Starting a spending war is AT&T's best option," of the company's recently announced wireless capex budget through 2015.

The numbers are striking, according to Moffett's calculations.

In 2013, AT&T is expected to spend over $12 billion on its wireless network, roughly 30% more than competitor Verizon and 176% more than Sprint, which is already playing catch up when it comes to network strength.

Meanwhile, between 2009 and 2013, AT&T is projected to spend $57 billion cumulatively, compared with $54 billion at Verizon, $17 billion at T-Mobile and just $14 billion at Sprint.

In spite of what appear to be diverging strategies and earnings profiles heading into 2013, Moffett increasingly sees reason to believe AT&T is simply being forthcoming about the true capital costs telecoms face as they prepare for growing smartphone and data usage. The analysis also raises the question of whether the numbers behind Sprint's unlimited data plans and smaller-than-peer wireless network spending reflect reality.

" Once again, Sprint's chronic under-spending over the past four years is striking, particularly in light of its open courtship of super heavy users as a consequence of its heavy promotion of its 'unlimited' data plans," wrote Moffett of the differences between AT&T and Sprint. "This raises obvious questions about the widely held expectation that capital spending can return to below-industry levels after just two years of Sprint's Network Vision," the analyst added in the Dec 6 note.

For more on AT&T and Verizon, see why the iPhone drove telecom paranoia in 2012.

-- Written by Antoine Gara in New York

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