The past week saw quite a few developments in the telecom
sector. AT&T (
T
) continued to fill its spectrum war-chest from multiple
sources, filing an application with the FCC to purchase
licenses in the 700MHz and AWS spectrum bands from CenturyTel. With
the LTE-capable iPhone 5 launched, Sprint (
S
) touted its aggressive rollout plans that will bring LTE to more
than 123 million people by the year-end and brought attention to
the million LTE devices it has sold do far to alleviate fears about
its poor LTE coverage. Verizon (
VZ
), meanwhile, looks to take advantage of the iPhone 5 launch to
promote its industry-leading LTE coverage.
AT&T's spectrum deals
Having learned a lesson from the T-Mobile debacle last
year, AT&T is targeting smaller deals/acquisitions to
meet its spectrum needs. The second largest U.S. wireless carrier
recently filed an application with the FCC, requesting approval to
purchase spectrum licenses in the 700MHz and AWS bands from
CenturyTel. This comes on the back of a host of spectrum deals
AT&T announced in recent months, including decisions to acquire
Nextwave Wireless and purchase spectrum licenses from Cox
Communications, Peoples Telephone Cooperative, Comcast (
CMCSA
) and others. (see
AT&T Continues To Stitch Together Spectrum
Deals As Verizon Races Ahead With LTE Plans
)
AT&T needs the additional spectrum it is buying to augment
3G capacity as well as to build out a nationwide LTE network in
order to catch up with Verizon, which is currently well ahead
in the LTE race. Verizon, which started deploying LTE much earlier
than AT&T, has a LTE network available to more than 230 million
Americans in 371 markets across the U.S. By the year-end, Verizon
expects to cover around 260 million people in more than 400
markets across the country. In comparison, AT&T's LTE
network covers about 80 million Americans presently and the carrier
plans to add another 70 million people to its coverage by the
year-end.
See our complete analysis for AT&T
Sprint sells a million LTE devices
In case you thought Sprint's puny LTE coverage would play a
role in increasing its churn rate, the company CEO Dan Hesse has a
stat for you. Speaking at the Goldman Sachs Communacopia
Conference, Hesse said that Sprint has managed to sell 1 million
LTE devices so far despite what is being perceived by many as LTE
disadvantage. While 1 million LTE customers may not be many, it is
still 3% of Sprint's postpaid base. Considering that Sprint has
just started its LTE buildout, the achievement is no small feat if
you were to compare it to Verizon (
VZ
), the largest U.S. wireless carrier. Verizon started its LTE
rollout in late 2010 and now has a LTE network that covers more
than three-fourths of the U.S. population, but it has managed to
convert only about 12% of its postpaid base to LTE.
Clearly, Sprint is reaping the benefits of LTE gradually seeing
more consumer interest with the technology maturing and
increasingly being used in some high-profile smartphone launches
such as Samsung's Galaxy S III and more recently, the iPhone
5. What has also helped is that the carrier has continued to
differentiate itself from rivals through effective marketing of its
unlimited plans. It has also worked in Sprint's favor that
rivals Verizon and AT&T are distancing themselves from
unlimited plans further. (see
Sprint Touts Unlimited Plans And Aggressive Rollout
Strategy; Sells A Million LTE Devices
)
Verizon's iPhone 5 opportunity
With Apple's (
AAPL
) iPhone 5 finally launched, Verizon has an opportunity to
market its vastly superior LTE coverage and increase adoption of a
technology that has so far lagged the pace at which the carrier has
rolled it out in the U.S. That way, it can look to start
recovering at least a part of the huge capital expenses it has
incurred. Verizon has been aggressively spending on
its LTE infrastructure, rapidly rolling it out in new markets
to maintain its lead over rivals AT&T and Sprint as well as
making sure the outages do not recur. Its capital expenditures have
been rising over the last few years, owing to the rapid deployment
of LTE as well as 3G network upgrades, and we do not see it coming
down anytime soon. (see Verizon's LTE Network Leaps To The Fore As
iPhone 5 Pre-Orders Start)
An increased adoption of 4G LTE will also help Verizon reduce
dependence on its 3G networks, which are increasingly burdened
by the heavy data usage of smartphones such as the iPhone.
Also, LTE as a network technology not only supports higher speeds
but is also more efficient than 3G at handling data, thereby
reducing Verizon's maintenance and handling costs.
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