Rumors that Sprint would buy T-Mobile may be dead wrong.
John Legere, T-Mobile president and CEO, was certainly not acting vanquished as he triumphantly announced the purchase of a nice chunk of spectrum last week.
The transaction puts into the carrier in position to continue its aggressive network expansion and represents a “significant step in T-Mobile’s evolution as a company,” Legere said.
T-Mobile US purchased 700 MHz A-Block spectrum from Verizon Wireless for $2.4 billion in cash and the transfer of AWS and PCS spectrum licenses, which have an aggregate estimated value of $950 million. T-Mobile anticipates rolling out service and compatible handsets on this A-Block spectrum as early as the fourth quarter of 2014.
Combined with its existing Boston A-Block holdings, T-Mobile will have low-band spectrum covering approximately 158 million people — including New York, Los Angeles, Dallas, Houston, Philadelphia, Atlanta, Washington D.C., and Detroit. The transactions give T-Mobile low-band spectrum in 9 of the top 10 and 21 of the top 30 U.S. markets.
As a result of the transaction, T-Mobile went from less than one to 9 megahertz of 700 MHz spectrum in the top 25 markets.
“The development of our nationwide low-band spectrum position is key to the long-term strategic health of T-Mobile,” Legere said. “The A-band spectrum is the ideal low-band complement to our current mid-band holdings.”
The carrier swapped spectrum in other bands. Legere assured analysts that the reduction in its AWS holdings from 45 to 42 megahertz and the decrease of its PCS spectrum from 31 to 30 megahertz would not affect its LTE rollout plans. In fact, the carrier’s total spectrum in the top 25 markets grew from 77 to 82 megahertz.
Legere said, “The spectrum to be transferred to Verizon is surplus to what we require to roll out our 20 by 20 megahertz LTE system.”
Addressing the Channel 51 interference issue, Neville Ray, T-Mobile CTO, said less than half of the population covered by the A Block licenses are affected by possible problems, and techniques also exist to shrink these zones. The interference problem will be resolved as a result of the FCC’s Broadcast Incentive Auction, planned for 2015.
“Recent regulatory and technological developments have notably improved the near term usability of the A-block licenses,” Ray said. “In addition, the confirmation of the Broadcast Incentive Auction have added certainty to the final resolution of any outstanding Channel 51 interference issues.”
Good News/Bad News for Towers
The good news for towers is T-Mobile will begin system deployment immediately in the A Block out side of the Channel 51 service contours. No Channel 51 service exists in the Dallas, Washington, D.C., Minneapolis, Miami, Philadelphia, Houston and Miami markets.
The bad news is the purchased spectrum covers 70 percent of the existing T-Mobile customer base and T-Mobile has 15,000 towers with in those areas. The overlay of low-band spectrum on existing infrastructure will lessen the need for new towers.
Ray assured the conference call that T-Mobile is not done adding spectrum to its cache in ways that are “prudent and pragmatic.” Expect the carrier to take part in future spectrum auctions.
The low-band spectrum, which covers 150 million people in major metro areas, improves in-building coverage as well as coverage in rural areas.
“It materially improves in-building coverage, providing an in-building signal that is two times that of mid-band and even greater when compared with high band,” Ray said.
And because it travels greater distances than high-band spectrum, it is more efficient for coverage at edge of cities and in less densely populated areas. Because of the strength its urban network, its initial focus for low-band build out will be in suburban and rural areas.
“There is a significant signal propagation improvement compared with mid-band. In rural areas this expansion of coverage can be four times better,” Ray said. “It gives us a very cost-effective path for in-fill and for extending our coverage area.”
Also, as part of the transaction, the two companies will realign spectrum blocks in certain markets, primarily in northern California and the Atlanta area.