AT&T's (NYSE: T) management thinks the carrier has enough runway with its wireless spectrum portfolio to last for the next two to three years, but the carrier fully intends to compete in upcoming spectrum auctions to augment its capacity, according to financial analysts.
That was one of the takeaways from a meeting between financial analysts and AT&T management held on Wednesday, according to analysts at Jefferies. The meeting included AT&T CEO Randall Stephenson, CFO John Stephens, AT&T Mobility CEO Ralph de la Vega, John Stankey, AT&T's chief strategy officer, and Wayne Watts AT&T's general counsel. The meeting came a day after AT&T provided guidance on its performance for the second quarter and the rest of 2014.
"With regards to spectrum needs, management likes AT&T relative position versus the other carriers and believes that capacity needs are satisfied for the next 2-3 years though existing assets, small cells and further densification," Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note. "AT&T intends to participate in spectrum auctions but believes there is limited further opportunity from acquisitions of privately owned spectrum."
AT&T said last month that it plans to bid on between 20 MHz and 40 MHz of spectrum in the FCC's 600 MHz incentive auction of broadcast TV spectrum, set for next year, if the auction entices enough broadcasters to participate. AT&T is also expected to participate in the FCC's auction of mid-band AWS-3 spectrum later this year.
In terms of network densification, AT&T will likely be adding between 1,500 and 3,000 macro cell sites to its network per year for the next few years as part of a wide-ranging effort to beef up its network and improve coverage and capacity, according to Bill Smith, president of AT&T network operations. Smith said last month said the carrier would be adding that many sites to its network per year "for the foreseeable future."
Other topics AT&T executives discussed at the meeting included AT&T's equipment installment plans, its Next handset upgrade program and its no-contract Mobile Share Value shared data plans.
The Jefferies analysts wrote that "management is confident in the strategy the company is taking with equipment installment plans. While ARPU is impacted, EIP Mobile Share Value and Next plans help with equipment subsidies, drive churn materially lower and help with smartphone adoption."
AT&T on Tuesday pointed to continued momentum with its Next plan. The carrier said it expects around 3.2 million AT&T Next smartphone sales in the second quarter, compared to 2.9 million in the first quarter. AT&T said Next sales have been rising throughout the second quarter, and are expected to be around 50 percent of all sales in the second quarter. That compares to around 40 percent in the first quarter (or 35 percent when taking out accelerated upgrades).
Next and AT&T's Mobile Share Value shared data plans go hand in hand, in that customers who choose to finance the cost of their device through Next then get access to discounted Mobile Share Value service pricing and earlier device upgrades.
However, AT&T noted the financial downside to the trend. The carrier said that Next and its Mobile Share Value plans lead to higher equipment revenues and lower service revenues and average revenue per user.
Yet the response AT&T's Mobile Share Value plans "has been better than expected. Churn has declined every month since the initiative was launched early in 2014, and the speed of the decline has been ahead of schedule," according to a research note from Credit Suisse analyst Joseph Mastrogiovanni.
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