Sprint’s LTE Spectrum, Chip Outlook Favorable, Says FBR

FBR Capital’s David Dixon this morning reiterates an Outperform rating on Sprint-Nextel (S) shares, after reflecting on a report Friday by Bloomberg’s Olga Kharif and Scott Moritz that said Sprint is near to an agreement with partner Clearwire (CLWR) to extent their network-sharing terms for another three to five years.

Dixon writes that there is “no gun to Sprint’s head,” given that its “commercial agreement” with Clearwire extends to the end of 2013, and a “take or pay” deal extends till the end of next year. He also thinks that while Clearwire may be betting on a “spectrum crisis” looming for Sprint, Sprint actually enjoys “multiple options to address this over time, with interim stop gap measures available for all carriers, including pico cells and/or alternative spectrum.”

Dixon thinks Sprint will make a debt offering by the end of the year to finance $2.25 billion of maturities coming due in March of next year. However, no deal with Clearwire will change Sprint’s plan to push ahead and revamp Sprint’s own network, he believes.

Dixon ticks off a list of reasons why he sees Sprint very well set up to accommodate the new 4G, or “Long-Term Evolution” (LTE) traffic:

1.9GHz is the spectrum frequency that Sprint is deploying to provide coverage depth for the first time in its 13 year history � suitable for over 90% of areas covered by existing cell sites [while] Sprint�s 800MHz iDEN spectrum band is being aligning by the global standards body (i.e. 3GPP2) into a proposed new global 850MHz spectrum band for LTE Advanced technology. [�] Clearly, 800MHz iDEN spectrum is transitioning from a liability to an asset for Sprint going forward. [�] For LTE, the global roaming band is aligned with Sprint at 1.9GHz (versus Verizon and AT&T) [�] driving roaming revenues to Sprint. [�] From a chipset perspective, Sprint is also well positioned. Qualcomm disclosed at 4G World in Chicago last week that the integrated front end and baseband LTE chipsets supporting the 700MHz/850MHz and 1.9GHz bands will be available from early FY12 while integrated front end and baseband LTE chipsets incorporating 2.6GHz (i.e. Band 41 not Band 38 and Band 7) available later in FY12 (delta of only six months).

Sprint shares today are down 12 cents, or 5%, at $2.60. Shares of Clearwire are off 5 cents, or 2.5%, at $1.95.