T-Mobile executive sees low-band spectrum as great equalizer with Verizon, AT&T

T-Mobile 5G
T-Mobile plans to use 600 MHz spectrum for its nationwide 5G deployment.

T-Mobile’s 700 MHz spectrum deployment and its decision to pick up a boatload of 600 MHz spectrum in the recent incentive auction are helping to narrow the gap between it and rivals AT&T and Verizon, finally getting the low-band spectrum that is crucial to success as a carrier, according to T-Mobile’s vice president and head of investor relations.

“To have a strong low-band spectrum position is essential as a carrier. I think that’s why Verizon and AT&T had a stranglehold for such a long time because they had the lion’s share of the low band,” said Nils Paellmann, at the Oppenheimer 20th Annual Technology, Internet & Communications Conference in Boston. “Now I think we’re in a position to really equalize that or even move ahead of them potentially.”

The 600 and 700 MHz bands help with in-building coverage because the lower bands can reach into basements and deeper into buildings. Plus, T-Mobile plans to use a portion of the 600 MHz spectrum for 5G—in fact, it expects to have the first nationwide 5G network using a portion of the 600 MHz in the 2020 timeframe.

A lot of the LTE radios rolled out for 600 MHz will be upgradable through software to 5G without requiring a truck roll, and it’s not focused on fixed wireless for 5G. “We think the more interesting cases are really mobile 5G,” and 600 MHz could be very useful for IoT applications, Paellman said.

RELATED: T-Mobile confirms speedy 600 MHz rollout for 2017, covering 1 million+ square miles

T-Mobile has made a great deal of progress improving its churn rate, but it still has room to take it lower. “We certainly think we can drive churn lower,” he said, noting the company’s 1.1% churn in the second quarter, the lowest it has seen so far.

“That’s definitely an incremental opportunity for us to the extent that we continue to build out the network” and close overage gaps in rural areas. It can also go after more suburban families that have a lower churn profile, as well as businesses. “I don’t know how low it could get, but certainly closer to 1%” is a near-term possibility."

Paellmann discussed a number of topics during today’s session:

  • On T-Mobile’s reputation for aggressive pricing: “There’s this misperception that a lot of our success is based on aggressive pricing,” he said. “That’s certainly part of it but I think it’s also about giving the customers a lot of benefits. It’s not all about pricing at this point. I think as far as our profile is concerned, we are in the fortunate situation now that we’ve come to this inflection point where the strong customer growth that we have seen has certainly turned into industry leading service revenue growth” and it’s now about industry-leading EBITDA and cash flow growth, he said. “We will be mindful … of implications for our financials” in terms of future moves.
  • On parent company Deutsche Telekom: “We work quite closely with them,” he said. A good area for example is 5G, where DT is arguably one of the world leaders and it’s working closely with SK Telecom in developing standards. “At the end of the day, I do think that the European markets are a little different from the U.S. markets. There is maybe a limit to what you can necessarily transfer from one to the other." There is some cross pollination, however. For example DT in the Netherlands has taken an “uncarrier” approach with unlimited pricing.
  • On a possible “new iconic phone” in the fall: “Typically we do well during iconic device cycles,” he said. “You have more switchers and we tend to do well if there are more switchers so that’s an opportunity.” Historically, T-Mobile has been more of an Android carrier and not iPhone, so there's an opportunity there but every iconic device cycle is different and you can’t necessarily apply the same rulebook as last year. "I think we’ll look at it with fresh eyes,” he said, and it depends on competitors’ actions. One of the learnings is if you have a promotion that’s copied by others, it’s less effective, so “we may not do the same thing” again. “We’ll see.”