Sprint Corp. (S) - Get SENTINELONE, INC. Report CFO Tarek Robbiati explained life without T-Mobile US Inc. (TMUS) - Get T-Mobile US, Inc. Report at a New York investment conference Tuesday. Beefing up its network is the top priority.
"It's all about rolling out our network," Robbiati told investors at the UBS telecom and media event. The carrier plans to spend $5 billion to $6 billion on its network next year, up from $3.5billion to $4billion in projected network capex this fiscal year.
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Sprint needs the investment to gain ground on T-Mobile, AT&T Inc. (T) - Get AT&T Inc. Report and Verizon Communications Inc. (VZ) - Get Verizon Communications Inc. Report . Improving the carrier's networks will also help Sprint Chairman Masayoshi Son build out the ecosystem of connected devices and cars that he is funding through the Softbank Vision Fund.
Of the four major wireless carriers, Gartner Inc. analyst Bill Menezes said, Sprint is in last place in subscriber counts and the geographic reach of its network. "That's a big deal because it it inhibits its ability to go after customers who are outside the fringes of suburbia in some areas," Menezes said.
"It becomes even more imperative now with no apparent combination occurring that would increase the reach of their coverage the way a merger with T-Mobile would have," he added.
Sprint already intended to boost investment in its network, regardless of how the merger talks went.
"[I]t would have been really, really a negative if we had embarked on an M&A transaction without investing in the network because of the regulatory uncertainties," Robbiati told investors. If Sprint banked on the merger to solve its network issues and regulators denied the deal, the carrier would have been in the lurch. "So, you can imagine us going into a transaction deciding not to invest in the network for whatever cash reason or synergy protection reason that you can come up with, that would have been a really bad decision," he said.
Sofbank, which holds more than 83% of Sprint, and Deutsche Telekom AG, which owns more than 64% of T-Mobile, could not decide how to divvy up ownership of the merged telecoms.
Robbiati said that the Softbank Vision Fund's investments in kindred technology compelled Son to desire control of the network.
"If you really step into Masa's shoes, he has now, with the Vision Fund, a lot of capital that he's putting to use in the TMT space," the Sprint executive said. Robbiati pointed to Arm Holdings plc, a chipmaker specializing in the Internet of things that Softbank acquired for $31 billion last year, and OneWeb Ltd, a satellite broadband startup that Softbank funded last year. He could also have cited Softbank's investment in Uber Technologies Inc., which has aspirations in self-driving cars, and Nvidia Inc. (NVDA) - Get NVIDIA Corporation Report , which is developing tech for autonomous vehicles.
"All of that makes us at the epicenter of Masa's vision," Robbiati added. "And this is the reason why he was uncomfortable ceding control."
While Sprint may be the No. 4 carrier in the U.S., it operates a nationwide network in one of the world's most important economies. Filling in the gaps will help it provide better wireless service, and support Softbank's investment portfolio.
"The idea that you can have a network asset and make it as pervasive as possible really is going to be necessary to support this huge digital eocsystem that Softbank has been creating for decades," Gartner's Menezes said.
Uber's desire to roll out self-driving cars is a prime example. "To do that you need to really (have) ubiquitous connectivity because an autonomous car generates a lot of data both to transmit information about its state as well as to get its instructions and responses," the analyst said. "That is going to require a lot of bandwidth and its going to require coverage everywhere you want to provide car service."
Sprint's network could dovetail with OneWeb's satellite network, once the latter is built.
The next question is who will pay for Sprint's network upgrade. The carrier has $34 billion in long-term debt, according to FactSet.
"Is this going to require additional money from Softbank or will they raise it in the capital market or do they believe they are on a growth curve in the Sprint business that is going help self-finance a lot of what they need to do?" Menezes asked.
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