Wireless spectrum crunch has become the major issue in the U.S.
telecom industry. Carriers are finding it increasingly difficult to
manage mobile data traffic, which is growing by leaps and
bounds. The situation has become even more acute with the
growing popularity of
) iPhone and
) Android smartphones as well as rising online mobile video
streaming, cloud computing and video conferencing services.
According to a recent study from
Cisco Systems Inc.
), global mobile data traffic is expected to grow 18-fold by 2016.
About two-thirds of the growth will stem from video streaming.
Despite significant investments made by carriers in network
upgrades and efficiency, the demand will likely outstrip the supply
in the short term, which would lead to dropped connections, rising
prices and lousy service.
Since the new spectrum auction by the FCC will not be available
before the new decade, carriers are looking for new profound
technology solutions to avoid network congestion. The new solutions
range from accelerating the roll out of more efficient 4G LTE
networks to building a new cell technology known as "small
Small Cells the Next 'Big' Thing?
The small cells are the mini versions of the gigantic wireless
broadcast towers that send and receive networks for all cell phone
calls. These cells are more compact than traditional ones and are
easy to install anywhere in buildings, or streets.
The carriers can offer enhanced wireless services with better
data speeds and fewer problems by creating a dense network of small
cell stations (a mix of microcells, piocells or femtocells). The
revolution of these cells will change the overall dynamics of the
wireless industry in the coming years.
The upcoming small cell technology will be a boon to the entire
wireless industry, stimulating strong growth prospects in the years
ahead. The third-largest U.S. wireless provider,
Sprint Nextel Corp.
), will be the first carrier to take advantage of this technology,
as it plans to install small cell stations later this year.
), the second-largest wireless carrier, is planning to deploy the
new network, though thetiming remains unclear.
Verizon Communications Inc.
) and the fourth-place wireless provider T-Mobile USA, a unit of
), are currently eyeing the prospects of small cell technology.
The deployment will also boost equipment manufacturers such as
) and Nokia Siemens, a joint venture of
). We expect the deployment to take larger market share over the
next few years.
Since the deployment of small cell stations is in the initial
stages, the costs cannot be determined currently. As a result, we
stay on the sidelines and carefully watch the cost and the
synergies derived from the deployment.
We are maintaining our long-term Neutral recommendation on
Sprint, AT&T and Verizon. For the short term, the stocks retain
the Zacks #3 (Hold) Rank. Deutsche Telekom holds the Zacks #5
(Strong Sell) Rank.
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