T-Mobile predicts little increase in network capex despite increasing data usage

BraxtonCarter
T-Mobile CFO Braxton Carter (left) and CEO John Legere.

T-Mobile executives said they don’t foresee any notable increase in capex investment over the next few years even as the carrier continues to build out its network. And they claim that will eventually force Verizon to offer its own unlimited data offerings.

The nation’s third-largest mobile network operator now routes 93 percent of its data traffic over LTE, executives told attendees at an investor conference this morning, and more than 60 percent of its voice calls are carried over VoLTE. That has enabled the operator to maintain a more efficient network, raising its cost of service margin by 180 basis points year-over-year in the latest quarter, Jennifer Fritzsche of Wells Fargo Research noted. And it will help T-Mobile meet ever-increasing demand for mobile data without markedly increasing its capex in the next few years.

“We’ve got a significant amount of dollars that are rolling year to year into different purposes,” CFO Braxton Carter said. “At the end of this (incentive) auction we’ll pivot dollars to the 600 (MHz spectrum) and it’s a rolling investment, but we don’t see any significant increase in capex on the horizon. Sure, it went up a little bit this year from last year, but you’re talking a few hundred million dollars on a year to year-to-year basis as we continue to scale the network.”

And while the major U.S. carriers have recently honed their focus to densify their networks to increase both coverage and capacity, T-Mobile boasts that it operates the densest wireless network in the country. The carrier expects to deploy only several thousand small cell sites this year and has agreements to launch another 7,000 small transmitters.

Both T-Mobile and Sprint launched so-called unlimited data plans several weeks ago, leading some analysts to question whether their networks will be able to keep pace with increased usage. But CTO Neville Ray said T-Mobile’s network will meet that increased demand, eventually forcing the nation’s No. 1 carrier to follow suit with its own unlimited offering.

“Watch what happens over the next two to three years as the big guys try to compete with ever-increasing demands of these mobile networks,” Ray said. “Verizon will not do unlimited… they don’t believe in it. It’s what consumers want in this industry. You can stand on a stage all day long and tell people ‘You don’t need this thing that I know you all want;’ sooner or later you’re going to have to deliver it to compete in the marketplace.”