September 19, 2014 — Recent estimates of 1 percent cell site growth in a CTIA survey may seem underwhelming, but to understand the health of the tower industry you should look at the revenue per cell site, which is going up at a muscular pace with both amendments and collocations increasing, according to Jennifer Fritzsche, managing director in the Equity Research department at Wells Fargo Securities.
Fritzsche gave the track chair address at the Tower and Small Cell Summit last week in Las Vegas, where she drilled down and shared her analysis of wireless infrastructure deployment activity at all four major carriers.
“While small cells will show a higher growth rate, we believe macrocells will continue to increase in absolute numbers,” Fritzsche said. “AT&T, when it announced Project Velocity IP in 2012, said it would add 10,000 macrocells. While Verizon has not confirmed it, it will have as much growth or more. It is the consistent spender in the industry.”
Verizon Wireless is well into its 4G network deployment with 308 million LTE POPs in the 700 MHz band, more than 500 markets with LTE coverage, and 76 percent of total data traffic on its 4G LTE network. But it’s not done yet.
“The Verizon Wireless CFO says don’t expect wireless capex to come down anytime soon, even though they are — quote-unquote — done with the LTE build out,” Fritzsche said.
“Verizon is known for the quality of its network,” Fritzsche said. “It has been very aggressive with its backhaul. Sources say they are aggressively deploying dark fiber to the cell sites, which gives them more control and they can light them up as they see the demand.”
Their future network plans are definitely focused on network densification, investing in small cells, DAS and in-building coverage. They plan to deploy LTE on 1700-MHz and 2100-MHz AWS spectrum, and their stated goal is to deploy VoLTE by the end of the year.
“Even Verizon’s LTE network covers more than 308 million LTE POPs [U.S. population equals 310 million], the Verizon CFO says the wireless capex will not come down any time soon, even though the LTE build out is completed. It speaks loudly to the densification that has yet to occur,” Fritzsche said.
AT&T has LTE coverage of 300 million in population on 700-MHz spectrum and more than 600 markets with 4G LTE coverage. Two-thirds of its postpaid smartphones are LTE-capable devices, and 84 percent of postpaid subs use a 4G-capable device.
In the future, the carrier plans to deploy LTE on Advanced Wireless Services and Wireless Communications Service (2.3 GHz) spectrum. It has already begun refarming the 1900-MHz Personal Communications Service spectrum. Additionally, it will begin rolling out LTE Advanced carrier aggregation technology later in 2014.
“There have been a lot of questions about the stops and starts of capital spending at AT&T,” Fritzsche said. “I think we have to look at the fact that they spent more than what was expected in the first half of this year. The guidance is for $21 billion in capex in 2014. To state the obvious, that is a huge number. I don’t see AT&T backing away from its investment in wireless or their commitment to their network.”
Sprint is catching up with the other carriers, with coverage of 255 million LTE POPs in 500 markets. A key part of its strategy is the deployment of Spark in major markets, using the old Clearwire spectrum at 2.5 GHz. The company has set its guidance for 100,000 POPs of 2.5-GHz Spark coverage by the end of 2014. It should complete to rollout LTE on 800-MHz spectrum by year-end 2015 and on 2.5 GHz over next 3 years.
“Sprint is my wild card company,” Fritzsche said. “The Network Vision deployment has been a hard slog for Sprint, but hopefully we are seeing the light at the end of the tunnel.”
The iPhone 6, which was announced during Super Mobility Week, is the first Apple handset to operate on 2.5 GHz and holds the key to unleashing the power of Network Vision, according to Fritzsche.
“With 2.5 GHz being the cornerstone of Sprint’s strategy, this phone is a really big deal. Essentially, Sprint can now move iPhone users from a 5×5 channel for LTE to multiple 20×20 channels. This is a game changer for Sprint,” she said.
Sprint also launched an unlimited data plan with no throttling for $50 a month and a leasing arrangement for $20 a month. The question is when there will be a network to back up that subscriber plan. Fritzsche called the plan “transformational.”
T-Mobile has 233 million LTE POPs on AWS spectrum, 325 markets with 4G LTE coverage and nationwide VoLTE coverage over 200 million POPs.
“You have to give T-Mobile credit, a lot of credit. I have learned that it is a mistake to bet against Neville Ray [T-Mobile CTO],” Fritzsche said. “Since the breakup of the AT&T merger and with rumors of a merger with Sprint flying back and forth, T-Mobile has quietly built a very good network. The MetroPCS merger has proven to be a very logical move.”
Future network plans for T-Mobile include covering 250 million LTE POPs by year-end 2014 and more than 280 million POPs by mid-2015. It has begun the 700-MHz A block rollout, and 60 percent of its MetroPCS spectrum needs to be re-farmed and integrated. Additionally, wideband LTE is being deployed on 15×15 and 20×20 channels.
“I don’t expect most of this deployment to be done until the end of next year, so maybe the iPhone 7 will be able to operate on T-Mobile’s spectrum in the 700-MHz A block,” Fritzsche said. “T-Mobile has the easiest spectrum position footprint, because it is not bringing in a really high band spectrum.”