Postpaid net additions grew by 347,000, a 54-percent increase from 62,000 added in FY2Q15. These adds bring the total postpaid subscriber base to 25.7 million, up 1 percent on a year-to-year (YtY) basis. At the same time, customer retention programs are working; postpaid churn came in at 1.37 percent, down from 1.49 percent in FY2Q15. Postpaid average revenue per user (ARPU) keeps sliding, however, to $50.54, down 2 percent from $53.99 in FY2Q15.
Price competition with the other Tier 1 carriers has taken a toll on the top line, however. The net effect is that postpaid service revenues at $4.7 billion were flat to down 1 percent from $4.9 billion a year ago.
In turn, Sprint’s ability to fund its network expansion plans is hampered as it curtails capital expenditures (capex) to conserve cash.
Certainly, the company is reiterating a strategic program to optimize and densify its network. This program involves:
It is this latter point that raises some serious concerns as to how Sprint will achieve its network expansion goals and drive new revenues.
Sprint’s quarterly wireless capital spending has been in a nosedive for the past six quarters, declining at a compounded rate of 26 percent per quarter. From a peak of $1.6 billion in FY1Q15 (calendar 2Q15), Sprint’s wireless spending dropped steadily throughout the year to $577 million in FY4Q15. Wireless capex for the year totaled $4.1 billion, down 16 percent from$4.9 billion in the prior year.
The capital spending slide continued in the current fiscal year. FY1Q16 wireless capex came in at $376 million and dropped further to $358 million in FY2Q16.
It is important to note that capital efficiency (that is, the ratio of capex-to-service revenues) for these periods hit only 6 percent. That is barely in maintenance mode. When networks are expanding, carrier capital efficiency historically is at 15 percent or more. Even with capital cost saving measures, we would expect Sprint’s wireless capital efficiency ratio to be in low double digits, just to be able to meet its plan.
The big question is how much the company will invest through the balance of its current fiscal year.
In its October 25 earnings call, Sprint offered full-year FY2016 guidance for cash capex of “less than $3 billion, excluding devices leased through indirect channels.“
If we drop out the portions for wireline network and corporate capital expenditures, we estimate that Sprint has budgeted around $2.7 billion in wireless capex for FY2016.
Through mid-year, Sprint spent $734 million or just 27 percent of the budgeted total.
If it sticks to its plan, this means that Sprint must spend the nearly $2 billion balance on its wireless network upgrade and expansion over the next two quarters.
Can Sprint do it? How will it do it?
John Celentano is a technology marketing consultant and a wireless infrastructure expert.
August 9, 2016 — US Cellular’s 2016 network expansion activity got off to a slow start in the first half of the year, accounting for only 34 percent of its projected $500 million in full-year capital expenditures (capex).
This conservative investment suggests that capex in the second half of 2016 (2H16) will ramp up sharply each quarter, reaching levels comparable to the previous two years.
US Cellular is the fifth largest wireless service provider in the country behind the four national carriers – AT&T Mobility, Verizon Wireless, Sprint, and T-mobile US.
The company operates in regional tier two and tier three and rural markets covering 32 million people, in licensed markets mainly in the Midwest, parts of the West coast, and in several Eastern states and the Northeast. In all, it covers about 10 percent of the total U.S. population. Additionally, it reaches parts of the country where it is not licensed to operate through roaming agreements with other wireless service providers.
With 16 per cent market penetration, US Cellular serves nearly 5 million post- and pre-paid customers. The company adds about 200,000 post-paid customers each quarter, growing at a 1 percent compounded rate. Post-paid churn in 2Q16 dropped to 1.2 percent from 1.34 percent a year ago. Even with smartphone penetration at 77 percent of the post-paid customer base, post-paid average revenue per user (ARPU) is down to $47.37 from $53.62 in 2Q15. Consequently, service revenues declined by 8 percent on a year-to-year basis.
A lion’s share, more than 60 percent, of US Cellular’s capex is allocated in the radio access network (RAN) to expand its 4G LTE coverage and prepare the network for voice over LTE (VoLTE) services that serve its own customers and augment roaming agreements. During the past year, the company added 101 new cell sites and built 58 new towers that it owns and operates.
In its Aug. 5 earning call, the company upheld its guidance for 2016e capital spending at $500 million. This level is down 6 percent from $533 in 2015 and has declined at a 12 percent compounded annual growth rate (CAGR) from its peak of $837 million in 2012.
Nonetheless, US Cellular is balancing its capital spending in line with reduced service revenue levels. The company’s capex-to-service revenue, currently at 16 percent, indicates continuing network expansion activity.
John Celentano is a principal in Skyline Marketing Group, which provides technology marketing & sales strategy advisory in advanced communications services, and wireless, telecom, data networking infrastructure markets. Additionally, support is provided for internal positions in market analysis, business development, strategic planning, strategic marketing, product management, product marketing, sales operations.
For more information, go to https://www.linkedin.com/in/john-celentano-4822692
August 1, 2014 — While saying that Sprint’s work building out its network is not done, CTO John Saw told the carrier’s fiscal year first quarter earnings call that the focus is being shifted away from building out Network Vision to evolving its multi-band platform.
“Our focus on quality and optimization also applies to our capital spending as we reevaluate where our resources are focused while we wind down the Network Vision build. We are also leveraging SoftBank and our vendors to collaborate on ways to deploy the network on a more capital-efficient basis,” Saw said.
“When moving more traffic to our expanded LTE footprint, we are also able to spend less on 3G capacity than we had planned,” he added.
Capital expenditures were more than $1.4 billion in the quarter, up $359 million, because of the 2.5 GHz build, but year-over-year capex was down $481 million, because of reductions in Network Vision spending, according to Joe Euteneuer, chief financial officer.
“This year’s spending on network modernization has been lower as spend for construction has wound down as we approached our originally planned deployment targets. Partially offsetting this decrease is higher spending on Sprint Spark deployments,” Euteneuer said. “Our capital spend is expected to increase in the second half of the year as we continue to invest in LTE capacity by expanding LTE on 800 MHz and 2.5 GHz spectrum to enhance the customer experience.”
During the last three months, Sprint substantially completed the replacement of its 3G voice system and began offering high-definition voice nationwide, which Saw called the “icing on the cake, because of its exceptional clarity.” LTE coverage grew to 254 million people, as well.
Plans include enhancing voice coverage by adding more 800-MHz frequencies to the network footprint and strengthening LTE system coverage, speed and capacity in the 800-MHz and 2.5-GHz bands, with a renewed focus on network quality and optimization.
“We will relentlessly focus on network quality and optimization to ensure an optimal user experience,” Saw said. “In the last few months, we have committed more resources in the field where our engineers are working on individual cell site by cell site to ensure they are all working at optimum levels.”
The voice network has been turned up on 800-MHz frequencies in one-third of the Sprint footprint, and it is expected to be complete by the end of the year. The improvement will have an immediate effect as 60 percent of Sprint’s post-paid subscribers are on 800-MHz-enabled handsets.
Expanding the LTE footprint to 254 million people gives a good foundation to build on, Saw said, as the carrier expands Sprint Spark to cover 100 million people with LTE in the 2.5-GHz band by the end of the year, by which time Sprint expects to have capabilities for carrier aggregation in the 2.5-GHz band, giving added capacity and increased data speeds.
“We are excited to have begun the installation of eight transmit, receive (8T8R) radios, which should significantly improve the coverage and speeds of our 2.5-gigahertz TDD LTE service,” Saw said.
J. Sharpe Smith is the editor of AGL Link and AGL Small Cell Link. He occasionally contributes to AGL magazine, as well.