Leap CEO: 60% of our spectrum is not being used, and we're interested in network, spectrum sharing

Leap's LTE buildout uses AWS spectrum in mainly 5x5 MHz channels
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Doug Hutcheson, president and CEO of Leap Wireless

Hutcheson


with Doug Hutcheson, president and CEO of Leap Wireless.

Cricket provider Leap Wireless (NASDAQ:LEAP) is in the midst of its LTE deployment. The carrier is working to catch up to its larger rivals by providing subscribers with the latest LTE phones and high-speed data services. Doug Hutcheson, president and CEO of Leap Wireless, spoke with FierceWireless Executive Editor Mike Dano about Leap's buildout, its spectrum position and its network access payments to Sprint Nextel (NYSE:S).

FierceWireless: How is the LTE buildout going? And what spectrum is Leap using?

Hutcheson: We're anticipating this year that we'll have between 20 and 25 percent of our footprint up and running for the holidays. Then our buildout--we're doing it on AWS spectrum, and it's spectrum that we set aside three or four years ago for this buildout. And so most of the markets that we launch will be on AWS spectrum. There may be one market that we consider putting on some 700 MHz A Block spectrum in a couple of years.

We expect that we'll have a 4G LTE footprint in most of our markets over the next two or three years, and to cover about two-thirds of our actual footprint.

FierceWireless: Can you talk about channel configurations and what kind of speeds users can expect?

Hutcheson: The company's goal is to get initially to 5x5 MHz channels. I'm not going to be specific to the speed right now.

With that said, not all of the markets will launch at 5x5 channels. What we'll be doing is launching some of the markets on a little bit narrower channels than that and farming the spectrum over. But our target right now, our big next milestone, is to get to a consistent 5x5 channel or larger with LTE as soon as we can.

FierceWireless: When will Leap deploy LTE on 700 MHz?

Hutcheson: That's sometime down the road. We have some work we need to do with both the regulators and in the market to allow the spectrum to be fully utilized. We anticipated that it was going to take us a couple of years, and we still anticipate that to be the case.

FierceWireless: Can you name Leap's LTE vendors?

Hutcheson: The core of our network is a Cisco core. We haven't announced who we're going to have do the RAN, the radio access nodes.

FierceWireless: Clearwire recently announced it would reduce its initial TD-LTE buildout from 5,000 sites to 2,000 sites. Can you comment on Leap's deal with Clearwire?

Hutcheson: We did complete an arrangement with Clearwire, and we see that as a complementary, capacity offload-type agreement as compared to prime coverage. And so our focus for our primary activities remains on these initial launches that we're going to do. I don't think the Clearwire announcement materially changes our thinking about things.

FierceWireless: Does Leap have extra spectrum? Would Leap sell its excess spectrum?

Hutcheson: First, the company over the last couple-three years has moved a lot of spectrum around. We've done swaps, we've done some sales and swaps, we've done a number of transactions that have been concentrating additional spectrum in some of our larger markets.

The second piece is that we have spectrum in about 145 million covered POPs nationwide. And our footprint covers 95 million covered POPs. And in those markets we have 20 or more MHz of spectrum.

When we operate in a market, we have been really effective in how we utilize that spectrum. And approximately 60 percent of the spectrum [in our operating markets] is not utilized. It's ready to go for LTE. When I talked about how we're really focused on these 5x5 channels, that's our initial focus, but they may grow over time. That's really been us focusing on utilizing what we have as effectively as we can.

We're sitting there, having engineered ourselves with 10-15 MHz of spectrum [that is not currently used] that really is focused on getting us ready for 4G. So we have a good spectrum asset. Our focus on that is using that asset to deliver 4G to our customers, whether that's through building the spectrum or spectrum sharing or network sharing. Much like Europe has looked at that [spectrum and network sharing] that is something that we as an industry should be looking at as well.

FierceWireless: So you could go wider than 5x5 channels?

Hutcheson: I don't want to create unrealistic expectations, but yes, absolutely, over time.

FierceWireless: Can you talk about any specific discussions Leap has had about network or spectrum sharing?

Hutcheson: The European model on that is something I think has merit to be thought about here in the U.S. as well, particularly when you look at that spectrum asset that we have. It really is a circumstance for collaboration that could make a lot of sense. With that said I don't have any specific comments about any one conversation.

FierceWireless: What about an outright sale of Leap's excess spectrum?

Hutcheson: That's not what I'm talking about here, but the concept on that is to focus on benefitting the shareholder appropriately.

FierceWireless: Do you have a value assigned to your spectrum?

Hutcheson: Our spectrum portfolio [both used and unused spectrum] is worth about $3 billion.

FierceWireless: Some analysts have suggested that Leap could potentially sell all its spectrum and its network and become an MVNO.

Hutcheson: I don't have any specific comments on that one way or the other.

FierceWireless: Can you talk about Leap's negotiations with Sprint over Leap's $75 million network access payment to Sprint?

Hutcheson: I think you didn't quite capture what we said [in our previous quarterly conference call]. On the minimum revenue commitment, the company expects that it's going to pay most of that amount this year. There is a portion of that that is tied to the wholesale business that we may not pay that full amount. But I think there's a misconception that some large amount of money is in play here. It's actually a very relatively small part of that total, and it's involved in one specific element of the business. In fact I would say that, in payments to Sprint, the company will pay well in excess of the $75 million to Sprint this year.

I think some of the media picked up that Leap doesn't intend to pay Sprint $75 million when what we've pointed out is that a small piece of that is disputed. And I would add that the total payments that we will give to Sprint, across the variety of things that we do business with them, is well in excess of that amount.