MetroPCS bullish on LightSquared, if stumbling blocks are removed

MetroPCS (NASDAQ:PCS) is supportive of LightSquared's wholesale LTE business model, a top executive said. "If they can get funding and if they can get the network built, it's a wonderful option for us," said MetroPCS CFO Braxton Carter, speaking at the Morgan Stanley Technology, Media & Telecom conference.

MetroPCS currently offers LTE service in 13 markets, and plans to launch more LTE handsets this year to complement the two it has in the market. However, the company's LTE footprint is dwarfed by Verizon Wireless' (NYSE:VZ) LTE play.

"We will need 4G roaming partners," Carter concluded.

LightSquared, which has said it will launch commercial LTE service in the third quarter, has inked wholesale deals with two wireless carriers, but has not yet disclosed the identities of those carriers. The company recently secured a $586 million loan to help fund its network buildout, and Harbinger Capital partners, the hedge fund that is backing LightSquared, has reportedly restructured to allow more direct investments into LightSquared.

There are a number of stumbling blocks to an LTE agreement between MetroPCS and LightSquared, however--mainly, handsets that would work across both operators' LTE networks would have to support their separate, relatively obscure spectrum bands. Indeed, the LTE phones promised by Verizon Wireless (running on 700 MHz) will not roam onto MetroPCS' LTE network (in the AWS band).

Carter touched on several other issues during his appearance at the conference, including the flat-rate carrier's retail strategy, its spectrum position and industry consolidation. He said that only 15 percent of MetroPCS' subscribers are obtained through its own stores, and the rest are activated by third-party retailers. Carter said MetroPCS will expand its distribution into more affluent demographic areas, which he said it can do now that it offers nationwide coverage and a growing selection of smartphones. However, he said MetroPCS will not expand its presence at national, big-box retailers, a segment of the market he described as a "war zone."

On spectrum, Carter noted that MetroPCS rides on PCS and AWS spectrum, and has an average of 22 MHz of spectrum in its markets. He said MetroPCS will continue to "densify" its network on its existing spectrum, which takes both time and capital expenditures. However, Carter said MetroPCS will be "opportunistic" in trying to acquire more spectrum. "We're looking at everything out there" on spectrum, he said. MetroPCS is also seeking to expand its $1.6 billion credit agreement to include a new $1.5 billion term loan, which Carter said could be used to buy spectrum.

Carter also said that over the next several years he expects to see more industry consolidation, a process he described as "natural evolution."

For more:
- see this Bloomberg article
- see this replay of the Morgan Stanley conference

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