Sprint (NYSE: S) wholesale partner nTelos Wireless said it is selling off spectrum and its retail business in markets in eastern Virginia to focus on markets in western Virginia and West Virginia where it has a stronger retail presence and benefits from a network deal with Sprint. As part of the shift in priorities, nTelos is selling 1900 MHz PCS spectrum in its so-called "Eastern Markets" to T-Mobile US (NYSE:TMUS) for $56 million.
The carrier's Eastern Markets include Hampton Roads/Norfolk and Richmond, Va. NTelos said it will wind down its network and retail operations in its Eastern Markets over the course of the next year, and it expects to transition its subscribers in those areas to another carrier. During the transition period, nTelos said it "will continue to provide a quality network experience to its subscribers while minimizing discretionary expenditures."
NTelos' network currently covers 6 million POPs and after it sells off its Eastern Markets it will cover half that amount, 3 million POPs. The company's cell site count will decline from 1,446 to 998 in the Western Markets. NTelos counts 457,200 total retail customers, but just 277,100 in its Western Markets.
Once its spectrum sale to T-Mobile closes--which nTelos expects to happen in April 2015--nTelos will lease back a portion of the spectrum to continue operations in those areas until Nov. 15, 2015. As part of the shutdown, nTelos expects to book costs of $55 million. Additionally, nTelos said it will explore selling more Eastern Markets assets prior to the shutdown date, which may result in incremental cash for the carrier. The company might look to sell other non-core assets, including the sale of owned towers and undeployed spectrum.
In its statement, the company said it will have increased financial flexibility to invest in its Western Markets thanks to the cash generated from the winding down of its Eastern Markets and the elimination of capital expenditures and costs. However, nTelos did not say how much money it will save by exiting the Eastern Markets.
"In an effort to strengthen our retail sales performance and leverage our strategic relationship with Sprint, we are right-sizing our business and redirecting our resources on our Western Markets, which provide us the greatest opportunity for sustained, profitable growth," nTelos Chairman Michael Huber said in a statement. "At the same time, we are exiting markets that have become increasingly competitive and where we have been unable to achieve acceptable financial returns."
Under the revised terms of the network agreement Sprint and nTelos agreed to in May, nTelos will continue to be the exclusive network provider for Sprint services in its western Virginia and West Virginia service area, which covers around 2.1 million POPs. Sprint customers will have access to nTelos' LTE network and nTelos will have access to Sprint's 800 MHz, 1900 MHz and 2.5 GHz spectrum throughout the territory. Additionally, nTelos retail customers will also have access to Sprint's nationwide LTE network outside the nTelos network footprint.
As part of the deal, nTelos also said it plans to expand and build its LTE network in the western Virginia and West Virginia territory to specifications that are aligned with Sprint's Network Vision network modernization program. Further, nTelos also agreed to make "future feature upgrades," presumably for LTE Advanced services and beyond.
As part of the exit from the Eastern Markets, nTelos plans to strengthen its Western Markets' network and operating results by expanding LTE services, improving retail performance and enhancing service capabilities. "The initiatives we are announcing today enable us to focus our operations where the opportunity is greatest and where we are the most competitive against other carriers," nTelos President Rod Dir said in a statement. "We look forward to bringing our customers in West Virginia and western Virginia a terrific 4G experience."
NTelos is just the latest regional wireless carrier that is either scaling back its wireless business or existing the space altogether. Other wireless carriers that have announced plans to exit or withdraw from the space include Cincinnati Bell Wireless, Revol Wireless, Mobi PCS, Plateau Wireless, Cellular One in Wyoming and Montana, AirFire Mobile and others.
For T-Mobile, the chance to scoop up 1900 MHz spectrum is likely what drove the deal. T-Mobile is also going to be deploying LTE on 1900 MHz spectrum in rural areas where it does not have GSM coverage today.
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