Analysts: Verizon working with Ericsson to add small cells, sees positive results of LTE-U trials

Verizon Communications (NYSE: VZ) executives are comfortable with the company's wireless spectrum position and the company is employing several strategies to densify its network, including small cells, according to a financial analyst who attended a meeting yesterday with the company's management. Additionally, Verizon is seeing positive results from its early tests of LTE-Unlicensed technology, which the carrier hopes will help augment its licensed spectrum capacity.

Yesterday Verizon's top management held a meeting to discuss the company's strategy with sell-side analysts, and Verizon CEO Lowell McAdam was among the executives in attendance, according to a research note from Wells Fargo analyst Jennifer Fritzsche.

Verizon noted that it is "working closely with Ericsson (NASDAQ: ERIC) in actively deploying small cells and distributed antenna systems (DAS) to help densify its wireless network," Fritzsche wrote. Verizon is also leveraging its wireline footprint, primarily in the Northeast, to help make its network more dense, she wrote. Verizon could be doing so via fiber deployments for small cells and DAS systems.

According to a research note from Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata, following the AWS-3 spectrum auction, Verizon now has AWS spectrum that covers 80 percent of the U.S. population with more than 60 MHz of AWS spectrum, allowing for "ample future LTE capacity." However, it likely will not be until early 2016 or later until Verizon and other carriers start deploying AWS-3 spectrum because government users need to be cleared from the airwaves.

"The company intends to supplement this deployment with the incremental small cell and unlicensed LTE deployments, as well as the refarming of PCS spectrum currently used for CDMA," the Jefferies analysts noted.

Interestingly, Verizon's management highlighted that recent tests have shown "good performance" of mixed LTE-U and LTE deployment, according to the Jefferies analysts. They wrote that Verizon is seeing better coexistence and lower interference between LTE-U and Wi-Fi networks than exists between different Wi-Fi networks. Verizon earlier this year announced that it plans to deploy LTE-U technology in the 5 GHz and 3.5 GHz bands starting in 2016.

T-Mobile US (NYSE:TMUS) has said it will be one of the first carriers to deploy a standardized version of the technology known as a Licensed-Assisted Access in 5 GHz spectrum in 2016. AT&T Mobility (NYSE: T) has said it might use LTE-U, but only if it can assure that it will not harm Wi-Fi networks.

In other news from the meeting, Verizon's management noted the carrier will launch some promotions beginning in May, with the goal to get more customers to move to higher data buckets, which generally cost more. The carrier's management noted that customers' data usage increases by more than 50 percent on its More Everything shared data plans.

"Management believes that Verizon Wireless must offer a quality product to drive value to subscribers with less of a focus on price competition, and should only use promotional activity selectively," the Jefferies analysts added. That echoes comments Verizon Communications CFO Fran Shammo made during the company's first-quarter earnings call.

The Jefferies analysts also added that Verizon's management believes that having two pricing models co-exist--the traditional model of subsidized devices and equipment installment plans--has "introduced extra complexity to the customer relationship."

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