Despite commitments by T-Mobile and Sprint to build out 5G in rural areas, U.S. Cellular isn’t expecting to see big changes coming to its mid-sized markets anytime soon.
During the company’s fourth-quarter earnings call on Friday, U.S. Cellular President and CEO Ken Meyers was asked about the ramifications of the T-Mobile/Sprint deal, which appears closer than ever to closing by April 1. U.S. Cellular is a regional carrier and gets a lot of its revenue from roaming deals with other carriers.
Short term, there’s likely to be a lot of advertising, but the deal has been in the works for some time and U.S. Cellular has been making changes in its product offering, brand positioning and network that position it well for the changes ahead, according to Meyers. In fact, he suggested it’s a prime opportunity to sweep in and take some Sprint customers during the transition. “I think there is some opportunity,” he said.
Longer term, “the fact of the matter is the economics of that deal … are not going to be made or broken by what happens in mid-size and rural markets. It's going to be what happens in the big markets, and that's where I expect to see most of the action,” Meyers said.
Leading up to a district court judge’s decision to allow the transaction to go forward, T-Mobile pledged that the new combined entity will cover 85% of the United States rural population with 5G service within three years of the transaction and 90% within six years. They also committed that, within three years, two-thirds of the rural population would have access to 5G download speeds of at least 50 Mbps, while 55% will get access to 5G download speeds of at least 100 Mbps.
U.S. Cellular’s 5G aspirations
U.S. Cellular is in the process of completing the final stages of its Voice over LTE (VoLTE) rollout and beginning its multi-year rollout of 5G, starting with its initial 5G deployment in 2020 using its 600 MHz spectrum. It plans to augment that, likely later this year, with millimeter wave spectrum to increase speeds and support future use cases, he said.
Meyers couldn’t talk about spectrum auctions—Auction 103 is still in the assignment phase—but U.S. Cellular did gain millimeter wave spectrum in Auctions 101 and 102, which involved the 24 and 28 GHz bands. The company also is interested in getting C-band spectrum for mid-band coverage.
Asked about the company’s interest in Dynamic Spectrum Sharing (DSS), which enables carriers to use the same spectrum for 4G and 5G rather than undergoing a big refarming effort, U.S. Cellular EVP and CTO Mike Irizarry said they think it’s a great technology and will be testing it.
Similar to T-Mobile, which also uses 600 MHz for 5G, U.S. Cellular does not need DSS right away for its initial deployments of 5G, but it will look to test and deploy DSS down the line, according to Irizarry.
The company is estimating a range of $850 million to $950 million for capital expenditures and pointed to much of the work that's required in the network space in 2020, such as completing the VoLTE rollout, continuing with the low-band 5G deployment and beginning its targeted millimeter wave rollout.
Here are a few other tidbits from U.S. Cellular’s latest quarterly results:
- Postpaid handset churn was 1.11% for the fourth quarter of 2019, higher than last year, driven primarily by aggressive industry-wide competition. Total postpaid churn by handsets and connected devices was 1.38% for the fourth quarter, higher than a year ago and flat sequentially.
- Inbound roaming revenue was $42 million, an increase of 11% or $4 million year-over-year, driven by higher data volume.
- The company, which has about 5 million customers, sees room for growth in various segments. For example, unlimited plans represent only 43% of its base, and it expects to migrate more customers to those higher-priced plans. It also has 396,000 feature phones on its network, providing an opportunity to migrate them to smartphones.