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Impact of Hurricane Sandy on Wireless Service Providers

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Exact numbers on damages remain unknown.

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MINYANVILLE ORIGINAL Hurricane Sandy knocked out cable and phone connections to more than 1 million customers in the New York area. [Editor's note: Given that approximately 8.5 million households were without electricity, the actual number of customers who couldn't use their cable even if it was technically available was much larger.] According to the Federal Communications Commission, or the FCC, 25% of cell sites in 10 states and the District of Columbia were not working as of Tuesday. According to Reuters, FCC Chairman Julius Genachowski said yesterday that conditions were improving, but "serious outages remain, particularly in New York, New Jersey, and other hard-hit areas."

It will likely get worse before it gets better because many cell sites have been running on backup generators for the past 48 to 72 hours. As they run out of fuel, these sites will fall off the power grid. Portable backup generators can be used to power the sites only for an additional 48 hours -- if the generators are available, the sites are accessible, and fuel can be sourced.

Even without the looming generator crisis, providers are scrambling.

Sandy hit Verizon (NYSE:VZ) hard in Manhattan. Bloomberg reported yesterday that Verizon's headquarters at 140 West St. in Manhattan flooded, submerging fiber and copper lines in the basement of the building. Two other central offices that held telecom equipment were also flooded. According to the Wall Street Journal, the problematic areas for Verizon have been lower Manhattan, Queens, and Long Island, where the wireline and wireless networks are not functioning. Two main critical switching centers in Manhattan were hit hard by the storm. All customers using these networks have had no access to any of Verizon's services.

Verizon kept its "Service Emergency" status for Connecticut, Washington, DC, Delaware, Maine, Maryland, New Jersey, Pennsylvania, and Virginia in a message to customers on its website (via Huffington Post). Despite its network problems, 96% of Verizon cell sites were operational between Maine and Virginia as of yesterday. Exact numbers remain illusive, though, on how many customers were impacted by the 4% of non-functioning cell sites. All of its cell towers had at least eight hours of backup power before the storm.

In its message to customers, Verizon reported some wireless service returning to "lower Manhattan and elsewhere in the Metropolitan area."

Verizon is also the largest landline phone company on the East Coast. According to Reuters, its downtown office serves Wall Street and other downtown businesses. Verizon is focusing on restoring its landline services to below 39th Street in Manhattan, but it called the situation "bleak" yesterday.

The company has taken extra steps to help customers and non-customers. According to CNET, Verizon has deployed "Wireless Emergency Communication Centers" to provide device charging and computer workstations. These centers will be located in Staten Island, New York, as well as two locations in Tom's River, New Jersey. Monmouth University in New Jersey will also have a center. Wireless phones will be available to contact family and friends.

AT&T (NYSE:T) and Sprint (NYSE:S) also have not provided exact numbers on the extent of the damage to their networks. Reuters reported yesterday that both companies said they are making progress in improving their wireless service.

An announcement yesterday on an official Sprint blog stated it was experiencing service disruptions in the New York tristate area, parts of Pennsylvania, and parts of New England. Sprint cited loss of commercial power, flooding, loss of cell site backhaul connections, site access, and damaging debris as reasons for the service outages. Sprint closed down 180 stores before the store, and 80 were reopened on Tuesday.

A Sprint spokeswoman said yesterday that teams were still surveying the damage caused by the storm, but the teams could not investigate certain areas that were deemed too dangerous. Flooding in the Battery Park area has caused outages in lower Manhattan.

The Sprint announcement also mentioned that the Sprint Emergency Response Team will provide any local agency with 14 days of service free of charge for 25 Sprint ERT wireless devices upon request.

AT&T seems to have come out of the storm in the best condition. CNNMoney reported on Tuesday that an AT&T spokesperson stated that the "vast majority of our cell sites in the Northeast are online and work."

AT&T and T-Mobile have agreed to allow each others' customers to use their networks in New Jersey and New York. Both companies tried to merge last year in a $39 billion deal, but federal regulators would not allow it. It does not appear this temporary collaboration will lead to anything permanent. Both providers use GSM and UMTS standards, so they can share voice and traffic data. Also, customers can report to AT&T any lost or stolen wireless devices, and AT&T will block these devices.

According to eWeek, AT&T tried to alleviate the situation in lower Manhattan yesterday by deploying Cellular on Wheels, which are mobile platforms that have radio base equipment on them. These platforms use mobile generators and received a signal from a microwave link. Here's more from CNET on how AT&T aims to help those in lower Manhattan.

It is still too early for analysts to determine the financial impact on wireless carriers. The telecom sector already struggled in October, though, ranking among the worst performing sectors.

Analysts are watching Sprint, which is working on launching its 4G LTE networks to compete with other 4G providers. Analysts want to see how much damage costs will chip away at the $8 billion the company received from the Softbank (TYO:9984) deal. Sprint originally planned on using the money to pay down its debt and build its LTE network infrastructure.
Some have tried drawing comparisons to damages caused by Tropical Storm Irene to begin calculating estimates. In the third quarter of 2011, Verizon said that a two-week strike and Tropical Storm Irene cost the company about $250 million.

According to TelecomLead, Hurricane Sandy may negatively impact smartphone sales growth in 2012 as people in the North East reprioritize their budgets. The drop in demand for smartphones from companies such as Apple (NASDAQ:AAPL) and Samsung (KRX:005930) will hurt the telecom companies that provide access to wireless networks.

Twitter: @ChrisWitrak
No positions in stocks mentioned.
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