In a technology driven world, it has become a prerequisite for
the telecom companies to upgrade its mobile technology with the
high-speed networks. Currently, the Telecom industry is focusing on
the next-generation technology (i.e. fourth generation [4G ]),
which is based on Long Term Evolution (LTE ).
LTE has become the life-blood for operators across the world. It
is an evolution of GSM and Universal Mobile Telecommunication
System (UMTS ) standards.
Significance
Introduced in mid-2009,LTE became a standard technology in the
U.S. in 2011. It is the fastest wireless network technology and
uses radio spectrum allowing more data transfers with the same
bandwidth used by any 3G or other devices.
LTE has the capability to handle larger traffic without
incurring extra cost. It provides a downstream rate of at least 100
Mbps and upstream rate of at least 50 Mbps.
LTE , the biggest growth driver in the telecom industry, is
facilitating the companies to boost market share not only this year
but also in future. As the demand for mobile is rising in
leaps and bounds, operators providingEV-DO , CDMA, GSM,HSPA
andWiMAX services, are rapidly shifting to the high-speedLTE
networks given stiff competition and change in overall dynamics of
the telecom industry.
Let's discuss how the U.S. carriers are gradually adapting to
this new technology:
LTE is spreading rapidly throughout the U.S. market, making each
of the carriers well positioned in the competitive environment.
TheLTE technology was first deployed in Las Vegas when
MetroPCS Communications Inc.
(
PCS
) launched services in September 2010, followed by Verizon Wireless
in December 2010.
Verizon Wireless, a joint venture between
Verizon Communications
(
VZ">VZ
) and
Vodafone Groupplc
(
VOD">VOD
), leads the industry inLTE deployments with more than 190 markets,
covering more than 200 million people as of December 2011. The
company plans to expand the reach of its entire nationwide 3G
footprint by the end of 2013.
Verizon is also seeking to deploy4G services to rural areas
using tower andbackhaul assets, and the 700 MHz spectrum. On the
other hand,MetroPCS has deployed4G networks in majority of
metropolitan cities by the end of 2011 and is currently focusing on
introducing"4G LTE for All" services over the short term.
The second U.S. wireless provider
AT&T Inc.
(
T
) joined the league in September 2011 covering 15 markets by the
end of the year. In addition, the company expects to cover 11 new
markets with 74 million Americans in 2012 and the entire American
populace by 2013.
Sprint Nextel Corp.
(
S
), the third-largest U.S. wireless carrier, is yet to introduce
itsLTE networks. Initially, the company will enter into theLTE
arena only in four markets namely Dallas, Atlanta, Houston and San
Antonio by mid-2012. The coverage will likely touch more than 120
million by the end of this year and 250 million by the next.
Leap Wireless International Inc
. (
LEAP
) is the fourth carrier to launchLTE services in Tucson, Arizona in
December 2011. The company plans to deployLTE networks to
two-thirds of the existing CDMA network over the next two to three
years. With this, Leap will expand itsLTE coverage to 25 million
people by the end of this year.
Other wireless operators such as
U.S. Cellular Corporation
(
USM">USM
) is also seeking to deploy4G LTE technology, which is expected to
commence early this year. The company will first initiate services
in six cities including Iowa, Wisconsin, Maine, North Carolina,
Texas and Oklahoma.
Apart from the U.S.,LTE is also being well adopted by other
countries as the best opportunity to drive revenue growth going
forward. The countries, who adopted this technology, are as
follows.
Canada
GoingLTE
Canada adopted its firstLTE network in Ottawa in July 2011.
Rogers Communications Inc.
(
RCI">RCI
) was the first carrier to deploy services in the region, followed
by three largest cities - Toronto, Vancouver and Montreal.
In September 2011,
BCE Inc.
(
BCE
) tapped the largest opportunity through the introduction ofLTE in
some urban areas.
Telus Corporation
(
TU">TU
) expects to roll out4G to urban Canadians in the first half of the
year using the advanced wireless services (AWS ) spectrum, which
was bought from Canada's auction process in 2008.
Notably, the rural and remote Canada deployments depend on the
700 MHz wireless spectrum, which is expected to be auctioned in
2012 or 2013.
LTE Elsewhere
South Korea
: South Korea emerges as a strong winner as it is the first nation
to deployLTE to all its carriers.
SK Telecom Corp Ltd
(
SKM">SKM
),KT and LG U+ have started deploying its networks in the country.
SK Telecom leads the4G technology with the initial launch in July
2011.
The company will expand its deployments to 28 cities by this
year including six metros and nationwide coverage in 82 cities by
year-end 2013.KT will increase itsLTE coverage to 84 cities by the
end of April 2012 and LG U+ plans to expand its national reach by
the first half.
Spain
: The country's two largest mobile operators - Vodafone and
Telefonica S.A.
(
TEF">TEF
) - launchedLTE technology with the limited capacity through their
German units. Vodafone Germany launched its network in December
2010 andTelefonica's O2 in July 2011.
The nextLTE roll out is slated in Spain and Italy for Vodafone
while forTelefonica , the roll out will take place in Hamburg,
Berlin and theRuhr .
China
:
China is still in the early stages ofLTE deployments. None of the
major companies has launched its high-speed networks yet. The
initial experience ofLTE is expected this year when the world's
largest telecom operator, China Mobile, will launch the network.
The other major operators including
ChinaUnicom
(
CHU
) and China Telecom does not have any plans to launch services
until 2013.
China Mobile had set up Time Division Long Term Evolution
(TD-LTE ) technology in six major cities as part of an ongoingLTE
trial. The company completed the first phase of the trial and the
second is scheduled to be completed in June this year. ChinaUnicom
will continue to focus on its 3G offerings, which are on the rise.
China Telecom would not deployLTE until and unless the technology
becomes full-fledged in the country.
Bottom Line
TheLTE deployments will allow the global carriers to take
advantage of the new and unused spectrums while expanding their
abilities to deliver the strongest and the most advanced networks.
In addition, we believe that enhancing network capabilities will
lead to deployment of new opportunities, economies of scale and
will open up markets that were previously inaccessible.
We believe the ongoing efforts to upgrade the existing network
infrastructure would create an opportunity for more subscriber
growth, leading to higher average revenue per user. This will
likely boost future wireless revenue for the telecom operators in
the near future.
Currently, we are maintaining our long-term Neutral
recommendation on the stocks mentioned above. The companies, except
SK Telecom, ChinaUnicom andTelefonica , retain a short-termZacks #3
Rank (Hold). SK Telecom and ChinaUnicom hold aZacks #2 Rank (Buy)
whileTelefonica has aZacks #4 Rank (Sell).
BCE INC (
BCE
): Free Stock Analysis Report
CHINA UNICOM (
CHU
): Free Stock Analysis Report
LEAP WIRELESS (
LEAP
): Free Stock Analysis Report
METROPCS COMMUN (
PCS
): Free Stock Analysis Report
ROGERS COMM CLB (
RCI
): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
SK TELECOM CO (SKM): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis
Report
TELUS CORP (TU): Free Stock Analysis Report
US CELLULAR (USM): Free Stock Analysis Report
VODAFONE GP PLC (VOD): Free Stock Analysis
Report
VERIZON COMM (VZ): Free Stock Analysis Report
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