Verizon, Sprint, others turn to carrier aggregation, small cells for remainder of 2015 capex

The nation's wireless carriers are expected to put the finishing touches on their respective LTE coverage buildouts, and then will use techniques including small cells and carrier aggregation to add density and capacity to their networks, according to industry experts. Specifically, Sprint (NYSE: S) and Verizon Wireless (NYSE: VZ) have pointed to both small cells and carrier aggregation as elements of their respective network buildout strategies for the remainder of this year.

"At this point, it feels like capital intensity is pretty reflective of where each carrier is with its network build-out, and especially with regard to LTE. AT&T and Verizon are largely done, T-Mobile is getting there, while Sprint is the furthest behind and is still investing heavily in LTE and other upgrades," said Jackdaw Research analyst Jan Dawson, a FierceWireless contributor. "At the same time, all carriers are still investing in network densification (though there, too, Sprint seems likely to do more in the short term than the others based on what little they've revealed)."

ABI Research predicted global wireless capex will remain flat this year at $194 billion. "As compared to 2014, ABI Research forecasts a slight decline of 0.6% in global capex. North American operators such as AT&T and Verizon are expecting the percentage of capex revenue to decline in 2015," the firm said.

"I expect a lot of them are going to be spending their money on LTE Advanced features, mainly getting carrier aggregation up and running," added Ovum analyst Daryl Schoolar, also a FierceWireless contributor. Research firm Ovum said that total U.S. mobile operator capital expenses in 2014 hit $33.5 billion, or 14.2 percent of revenues (that's down slightly from 15.2 percent in 2013).

Already, Mike Haberman, Verizon's VP of network support, has said that the operator is actively deploying carrier aggregation technology in its 20x20 MHz spectrum channels and expects the effort will allow it to offer spectrum channels wider than a 20x20 MHz configuration in the future, which Haberman said would allow Verizon to offer faster peak wireless download speeds in the future. Verizon declined to provide details on the carrier's deployment of carrier aggregation technology, which essentially ties together disparate spectrum bands to create wider spectrum channels.

Verizon, too, is working to densify its network through new macro base stations and small cells.

Overall, Verizon said its wireless capital spending totaled $3.1 billion in the second quarter and $5.5 billion for the first half of the year, which Verizon said was 4 percent higher on a year-to-date basis. The company expects its capital spending to total between $17.5 billion and $18 billion this year.

As for Sprint, the carrier said it is also rolling out 20x20 MHz megahertz carrier aggregation. The carrier is deploying the technology in its 2.5 GHz spectrum in 80 markets across the country, including in Chicago, Atlanta, Houston, San Francisco and Detroit. "For those locations with carrier aggregation, we expect sector capacity and the speeds to double, which means customers with capable devices are already experiencing significantly faster speeds," said Sprint CEO Marcelo Claure during the carrier's earnings conference call, according to a Seeking Alpha transcript of his remarks. "Early results are showing peak speeds of 125 Mbps to 135 Mbps in markets like Chicago and San Francisco, making Sprint very competitive on speed today. And Sprint is one of the first operators worldwide to roll out carrier aggregation with antenna beamforming. With beamforming, we can significantly improve our users' experience at the cell edge and tests by independent third parties have confirmed the performance gains that we see."

Sprint said it too will deploy small cells, though it didn't provide specifics or details.

Overall, Sprint said its capital expenditures during the second quarter were $2.3 billion, up from $1.2 billion in the year-ago quarter -- the carrier attributed part of the increase to an uptick in its network spending. Sprint said it expects to spend roughly $15 billion during the next three years on capital expenses, largely to improve and densify its network. "Of course, it's easy to spend money and get the result, but if you have less money and then still want to achieve the number one network, you have to use brain instead of money and muscle," said Sprint Chairman Masayoshi Son during the carrier's quarterly conference call.

T-Mobile US (NYSE:TMUS), for its part, said it expects to spend $4.4 billion to $4.7 billion on capital expenses during 2015. The carrier said it is rapidly filling out its LTE coverage area, and is now working to improve its network with advanced MIMO technology. "We've already advanced with 2X4 MIMO. We have that across many major cities in the U.S. and we will be completing that footprint as we move through 2015. So [that's] a 20 percent to 30 percent uplift in capacity in its own right," T-Mobile CTO Neville Ray said during the carrier's earnings call, according to Seeking Alpha.

Finally, AT&T (NYSE: T) said it still expects to spend roughly $18 billion on capital expenses this year, but said that figure now includes its efforts to build out LTE in Mexico. Thus, AT&T is now spending less on its network in the United States than analysts had expected earlier this year.

But AT&T CFO John Stephens said the carrier believes new technologies like software-defined networks (SDN) could help the carrier reduce its network expenses. "I think there is a real opportunity with some of the activities are going on in software-defined networks on a longer term basis to actually bring that in capital intensity to a more modest level," he said during the carrier's quarterly conference call, according to Seeking Alpha.

Overall, AT&T said its capital expenditures totaled $4.7 billion for the second quarter.

For more:
- see this ABI release

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Article updated August 6 with information from ABI.