Sprint's (NYSE:S) decision to launch a nationwide TD-LTE network using Clearwire's 2.5 GHz spectrum could be a big win for the tower companies that will supply the sites for the buildout, according to an analysis by New Street Research.
Steve Elfman, president of network operations at Sprint, noted during the company's second-quarter earnings conference call that Sprint now plans to deploy Clearwire's 2.5 GHz spectrum on all 38,000 of its planned Network Vision cell sites in a nationwide rollout. And, due to the weaker propagation characteristics of 2.5 GHz, Sprint will also deploy small cells and other sites beyond the 38,000 Network Vision sites the company has mapped out. Previously, Sprint had said it would use Clearwire's spectrum as a "hotspot" LTE network to offload traffic in urban markets.
New Street Research analyst Jonathan Chaplin wrote in a research note that he expects Sprint's total cell site count to increase to somewhere between 50,000 and 60,000 sites, more than offsetting disconnects of old Clearwire sites. That increase could lead to incremental revenue growth for American Tower, Crown Castle and SBA Communications, the three major U.S. tower companies, he wrote. Sprint formally took control of partner Clearwire last month.
Chaplain noted that the estimated new 12,000 to 17,000 Sprint macro sites will replace around 16,000 Clearwire sites that will be decommissioned. However, he wrote this is a positive for tower companies, since the risk of Clearwire site decommissioning has been clear for some time while Sprint's expansion of Clearwire's spectrum was not confirmed until this week. Chaplin also wrote that Clearwire has paid below market rent on most of its towers and that the revenue per site on the new Clearwire replacement sites should increase to market levels. (The expanded Clearwire deployment will require adding antennas to cell sites, Sprint CFO Euteneuer told FierceWireless, not just replacing line cards.)
"The 2.5 GHz spectrum deployment may or may not represent new revenue for the tower companies, depending on their [major lease agreements]; however, even where Sprint is able to deploy 2.5 GHz spectrum under their MLA we believe they are likely to exceed their equipment quota on a fair portion of sites, driving additional amendment revenue for the towers," Chaplin wrote. "Finally, the small-cell deployment could benefit [Crown Castle] and to a lesser extent SBA if they use third party sites."
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