T-Mobile to start AWS-3 spectrum buildouts later this year, ahead of AT&T

This map, from Credit Suisse and Wiley Rein, show the 5x5 MHz paired I blocks T-Mobile purchased in the AWS-3 auction.

T-Mobile US expects to begin rolling out wireless services using its AWS-3 spectrum licenses as early as the end of this year, according to comments by company management to financial analysts at Jefferies. That would put T-Mobile slightly ahead of AT&T in terms of building out a network using AWS-3 spectrum licenses.

“We expect network improvements should continue as spectrum deployment and small cell build outs are under way,” the analysts at Jefferies wrote in a note to investors issued this morning, based on a meeting with T-Mobile’s head of investor relations, Nils Paellmann. “Deployment of 700Mhz is ongoing, with noticeable churn reduction in recently deployed markets. On the capacity side, efforts to refarm PCS/1900 spectrum for additional LTE builds should span the next 2-3 years, while AWS-3 deployments should begin later this year.”

T-Mobile executives have previously discussed their efforts to deploy small cells and refarm the carrier’s PCS spectrum, but the comments on the carrier’s AWS-3 spectrum licenses are notable considering the FCC’s AWS-3 auction ended just last year.

The Jefferies analysts said that T-Mobile’s network investments are “bearing fruit.”

T-Mobile was one of the main participants in the FCC’s hugely successful auction of AWS-3 spectrum last year. The auction of 65 MHz of spectrum ended in January 2015 with a total of $44.899 billion in provisional winning bids; T-Mobile walked away with roughly $1.774 billion in winning bids, and the FCC issued those spectrum licenses to T-Mobile in April 2015.

Carriers typically require years to fully deploy new spectrum. After purchasing the rights to deploy the spectrum, they must then add antennas to their cell towers capable of sending and receiving data over that spectrum. And perhaps more critically, they must also begin selling devices capable of working on that new spectrum band.

AT&T, the big spender during the AWS-3 auction with more than $18 billion in winning bids, said last year it expects to begin deploying the spectrum “beginning in the 2017-2018 period.”

Like most of the rest of the nation’s wireless carriers, T-Mobile’s AWS-3 spectrum licenses are just part of the carrier’s network buildout. T-Mobile initially launched its LTE network in 2013 on its AWS-1 spectrum, and has since expanded that to the 700 MHz spectrum it has been acquiring in recent years.

Further, T-Mobile has said it will bid in the FCC’s ongoing incentive auction of TV broadcasters’ unwanted 600 MHz spectrum; “we expect to see TMUS spend up to $8.3bn ($1.7bn used to acquire 700Mhz spectrum), maintaining the targeted 3-4x leverage target,” the Jefferies analysts noted.

A T-Mobile executive said earlier this year the operator could begin deploying its 600 MHz licenses as early as next year.

Of course, all of T-Mobile’s network efforts come with a cost. During the carrier’s recent second-quarter earnings conference call with analysts, T-Mobile CFO Braxton Carter said that the operator’s capital expense increased 13 percent year-over-year. “Cash CapEx was more front-end-loaded this year due to our very aggressive rollout of the 700 megahertz A-Block, which is bringing a lot of goodness as you're seeing in our customer retention or churn metrics. This is just the timing issue which we will normalize in the course of the year,” he said, according to a Seeking Alpha transcript of the event.

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