May 22, 2017 —
Representatives of T-Mobile promised at the 4th Annual MoffettNathanson Media & Communications Summit, held last week in New York, that any M&A activity would only be executed if shareholder value could be maximized. Then they engaged in a very convincing conversation about how good a Sprint hook up might be for shareholders.
Craig Moffett, senior research analyst, MoffettNathanson, interviewed three officials from T-Mobile, Braxton Carter, chief financial officer; Peter Ewans, corporate strategy; and Mike Sievert, chief operating officer.
When asked about M&A plans, the T-Mobile executives made it clear that if the carrier engaged in a merger, it would be coming from a position of strength with a high amount of confidence. Carter said that the carrier is happy with the performance of its brand, team and business model.
Led by outspoken John Legere, T-Mobile revels in its iconoclastic role as the outsider that forces change upon Verizon and AT&T. Nevertheless, merging with Sprint and becoming the third nationwide powerhouse looks enticing.
“Could there be an advantage in turbocharging our challenger position in the marketplace with increased capabilities from a potential partner through a merger or by combining in some way? Absolutely!” Sievert said. “There is a chance [that a merger would] enhance shareholder value on top of a business that is already performing well.”
Sievert reiterated the belief that both Charlie Ergen’s DISH Network and Sprint are both seeking a buildout partner, noting the impact of FCC buildout deadlines on the former and the “precarious” nature of the latter’s finances. Carter added that at the current pace Sprint’s 2.5 GHz rollout would take a decade.
“A combined company [T-Mobile/Sprint] would have the resources to put all that spectrum to work,” Sievert said. “We are really excited about the potential deals, potential value, potential synergies to unlock. We are going to work hard to see if anything needs to be done.
Sprint would be a “huge prize” in terms of hard synergies, which are primarily network driven, with a “treasure trove” of 2.5 GHz spectrum, according to Carter. The benefits of that type of scale, which could put T-Mobile on par with AT&T and Verizon, are hard to ignore.
“By truly creating a third scale national competitor, you can achieve the margin potential leveraging the fixed costs of the business that both AT&T and Verizon have,” Carter said. “Putting our networks together would truly give us the densification necessary to ubiquitously deploy that 2.5 GHz spectrum.”
Carter pointed to the successful Metro PCS merger as proof that the carrier could successfully combine its network with Sprint’s.
Toward the end of the interview, the T-Mobile panelists opened the M&A conversation to the wider sphere of possible players, including Comcast, Charter, Amazon and other “cable” providers.
“It is absurd to say that there are only four players in the [wireless] market,” Carter said. “There are multiple players coming, which will change the way the market is viewed from a regulatory standpoint.”
Carter ruminated on the shareholder value that would be created by a hook up of T-Mobile and Sprint with a coalition of Comcast and Charter.
“I totally believe in convergence. There is amazing potential,” he said. “It doesn’t matter if it is wireless or wired. The blending of those two models of business is going to change our world.”
Sievert noted that users do not care where they get their content from whether it is from wireless industry, cable industry or the media industry.
“They don’t care what you put in the ground ten years ago; they just want their content and they want it delivered everywhere. Our job is to create a mobile internet company,” he said.
T-Mobile will dip its toes into unlicensed LTE in 2015, it has been widely reported. The move is not altogether surprising in that it was the first carrier to embrace making cell phone calls over public Wi-Fi networks and home networks with its Personal CellSpot.
“Unlicensed LTE is emerging as a promising technology, and it is complimentary to Wi-Fi and compatible with VoLTE. This new form of LTE, once matured, will enable utilization of the 5-GHz unlicensed bands. As CTO Neville Ray has said previously, we are always looking at different technologies to bring additional benefits to our customers and this is more of the same,” said Lindsay Morio, T-Mobile spokesperson.
October 29, 2014 — In the third quarter 2014, T-Mobile spent $1.1 billion on capital expenditures, up from $0.9 billion in the second quarter of 2014 and up from $1 billion in the third quarter of 2013. Capex for the year is expected to be in the range of $4.3 to $4.6 billion, unchanged from prior guidance. T-Mobile’s increased capex reflects further investment in network modernization, according to company officials.
T-Mobile’s LTE network now covers 250 million POPs and is expected to reach 260 million by yearend 2014, 280 million by mid-2015 and 300 million by yearend 2015, according to Jennifer Fritzsche, senior analyst, Wells Fargo. Ten-by-ten megahertz LTE deployments have occurred in 43 of its top 50 markets.
“The roll out of the 700 MHz A-Block spectrum is progressing well with first sites already on air and handsets in the market, and we’re getting to hit our stride there,” T-Mobile CEO John Legere said during the third quarter earnings call. “We are also converting our 1900 spectrum from 2G to 4G LTE to add coverage, speed and depth to our network.”
T-Mobile continues to introduce wideband LTE in at least 15×15 megahertz configurations to new markets and is currently operational in 19 markets with at least 26 scheduled to be go online by year end.
T-Mobile has integrated with its merger partner MetroPCS in 55 markets with 78 percent of the MetroPCS customer base migrating onto the T-Mobile network, and 63 percent of the MetroPCS spectrum re-farmed and integrated into the T-Mobile network.
The CDMA portions of the MetroPCS networks have been shut down in Boston, Hartford, Las Vegas and Philadelphia, which is expected to cost between $250 million and $300 million for the year and $97 million in the third quarter. The network shutdowns will facilitate the realization of the network synergies made possible by combination of T-Mobile and MetroPCS.
J. Sharpe Smith is the editor of AGL Link and Small Cell Link.
Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.
“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.
The urban locations of T-Mobile’s towers – 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.
“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.
According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.
Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital. T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index. Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.
Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.
Deutsche Telecom is putting its money where its mouth is in the coming year, funding T-Mobile’s LTE and HSPA + rollouts, according to Rene Obermann, CEO, Deutsche Telecom, at the carrier’s Capital Markets Day, Dec. 6, in Bonn, Germany.
The biggest chunk of Deutsche Telecom’s total CAPEX next year will be spent in the United States to the tune of $4.7B to $4.8B, compared with the last three years, which averaged $2.7B. Then it will drop to $3B in 2014 and 2015.
“While the company had already announced plans to spend $4B on its U.S. network modernization plan, we view this longer-term spend as especially positive in terms of further visibility for the tower sector’s pipeline,” wrote Jennifer Fritzsche, Wells Fargo senior analyst, a research note. “Recall, all three major tower players (AMT, CCI and SBAC) have secured master lease agreements.”
Flush with cash and additional spectrum from the failed AT&T/T-Mobile merger, Deutsche Telecom is spending CAPEX on refarming the spectrum in the PCS band, as well as network modernization. More than 37,000 sites are being modernized in 2012 and 2013.
“T-Mobile gained more spectrum in a deal with Verizon, which enabled us to build a more efficient network and to have better LTE coverage, and we announced a tower transaction worth $2.5 billion gives a chance to maintain our operational flexibility,” Obermann said.