T-Mobile US (NYSE:TMUS) plans to significantly expand the footprint where its MetroPCS brand offers service--by around 100 million POPs over the next six quarters--as it continues to modernize its network and integrate MetroPCS customers following the merger between the two companies that closed earlier this month.
T-Mobile CFO Braxton Carter, who was formerly CFO of MetroPCS, said that the back office integration between T-Mobile USA and MetroPCS is now essentially complete and that the focus is now on a "more aggressive expansion" of MetroPCS' national footprint. Carter, speaking at the J.P. Morgan Global Technology, Media and Telecom Conference, also said T-Mobile is "weeks away" from seeding HSPA+ and LTE smartphones into MetroPCS distribution channels.
Carter said that MetroPCS will be "expanding to 15 additional major metropolitan areas very quickly." He did not name the markets, but MetroPCS executives have previously said the company would expand into markets including Houston, New Orleans, San Diego, Seattle, Washington, D.C., and Baltimore. Carter said the expansion will accelerate in third quarter and through early 2014. He said MetroPCS will continue its legacy distribution and dealer operations, and is well positioned to gain market share.
Interestingly, Carter noted that MetroPCS will have a leg up on its prepaid competitors by offering LTE services. T-Mobile CTO Neville Ray, who was speaking at the conference with Carter, said "there will be LTE access for those customers in those expansion markets," and noted that AT&T's (NYSE:T) new Aio Wireless prepaid brand does not offer LTE service.
Ray touched on T-Mobile's network modernization and expansion, and said the company had already blown past its target of having 170 million POPs covered with HSPA+ service on its 1900 MHZ PCS spectrum by mid-year, and is well on its way to covering 200 million by year-end. He also said he is "extremely confident" T-Mobile will surpass 100 million POPs covered with its own LTE network en route to covering 200 million by year-end. Ray said the integration with MetroPCS' LTE network "is actually moving very well" and that as of tonight customers on Metro's LTE network in Las Vegas will switch over to accessing T-Mobile's LTE network there.
Ray said that with the combined company "we're in this very strong spectrum position" and "we are not having to density our network at the pace that you hear many of the others talking about, which is a huge suck on capital." T-Mobile has said the transaction will allow it to deploy 2X20 MHz LTE in 90 percent of the top 25 U.S. markets using MetroPCS' spectrum in 2014 and beyond. The combined T-Mobile and MetroPCS has 76 MHz of total spectrum in the top 25 major metro areas, and counts 60,000 cell sites and distributed antenna network nodes, resulting in around 765 subscribers per cell site.
Ray said that the company is not currently looking to expand its network footprint and is eagerly awaiting next year's scheduled incentive auctions of 600 MHz broadcast TV spectrum. He said using such spectrum is "a far more effective way to go and build those opportunities out" and that getting access to such low-band spectrum would mean "we would finally have a level playing field in the U.S. marketplace" between smaller carriers and AT&T and Verizon Wireless (NYSE:VZ), which dominated the 700 MHz auction in 2008.
Carter also touched on T-Mobile's recent decision to increase the price of Apple's (NASDAQ:AAPL) iPhone 5 from $99 to $149. He said the $99 price was "set for a very limited period of time" and that the price increase was "all part of the planning to begin with."
Carter said T-Mobile expects to see continued improvements in churn over the course of the year as its network improvements and LTE deployments continue, and that the company's Simple Choice plans are resonating with consumers. "We will continue to innovate," he said, adding, "There's more to come and I think that's going to be key to effectively compete."
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