T-Mobile CFO on 600 MHz incentive auction: 'Dynamics are positive,' carrier could have up to $10B to spend

T-Mobile (NYSE:TMUS) CFO Braxton Carter said the carrier might have as much as $10 billion it could spend on spectrum during the FCC's incentive auction of 600 MHz spectrum next year. However, he said that he doesn't think T-Mobile will need to spend that much to obtain the spectrum it wants.

Speaking at the Deutsche Bank Leveraged Finance Conference, Carter said T-Mobile is well positioned to participate in the auction, and that he expects "robust" action from a variety of bidders, including potentially bidders from outside the wireless industry.

Further, Carter commented on Sprint's recent announcement that it would not participate in the auction. He said that T-Mobile never expected Sprint to be a major bidder during the event anyway, and that Sprint's withdrawal from the event likely won't affect T-Mobile's plans for the auction.

"Never in the history of the U.S. has there been an auction where there has been a set aside of spectrum for the competitive carriers," Carter said. The FCC recently agreed to withhold up to 30 MHz of spectrum from AT&T and Verizon during the auction so that smaller carriers like T-Mobile would be able to bid on the spectrum. "It's still such a victory for us."

Carter added that the FCC's spectrum reserve "sets up amazing pricing dynamics. I think this will be a robust auction. I think someone else will come in, be it cable, be it tech."

Carter also offered a glimpse into T-Mobile's plans for the auction. He said the carrier would like to create a nationwide footprint of low-band spectrum. He noted the carrier already has 700 MHz A Block spectrum covering roughly 190 million POPs, and that T-Mobile plans to purchase 600 MHz licenses that cover the remaining parts of the country it doesn't already cover with 700 MHz licenses. Carter predicted that likely wouldn't cost T-Mobile more than $1 billion to $1.5 billion in bids.

He said T-Mobile also will likely bid on 600 MHz spectrum in major metro areas as a way to reinforce its spectrum holdings there -- but he said T-Mobile would stay within its financial "envelope" in its bidding. "And we're certainly not going to buy 30 MHz of spectrum at the auction," he said. "But my hope is, well within our funding envelope, that we'll be able to get everything we need to get. And if it doesn't happen, and we had to fall back to our primary strategy of getting a nationwide footprint with some overlay, it's still a huge win for us."

Beyond the auction, Carter outlined some of T-Mobile's network densification plans. He said the carrier will continue to purchase 700 MHz A Block spectrum where it makes sense, and the price is right. He said the carrier will also continue to use small cells in "surgical" applications. "It's something that we have been very, very focused on," Carter said of T-Mobile's DAS and small cell efforts. "We will be deploying more and more small cells in the future," he said, noting though that backhaul and siting issues continue to make small cells difficult to deploy.

Carter also said that, because T-Mobile's LTE network was designed and built primarily with mid-band AWS spectrum, the carrier's network is already relatively dense compared with the LTE networks that were designed primarily with low-band spectrum. Signals on low-band spectrum like 700 MHz typically travel farther than those on mid-band AWS spectrum. "We already had a great deal of densification," Carter said, noting that T-Mobile typically needs to deploy five AWS towers to cover the same area as one 700 MHz tower. "We still have the most macro sites of any carrier in the U.S."

Finally, Carter addressed the perennial question of whether T-Mobile would be involved in merger-and-acquisition action. "It's not a question of if, it's a question of when and with who," he said. "There may ultimately be multiple transactions we can do in the future."

"We think the strategic opportunity is going to grow for us," he added.

Related articles:
Analysts: U.S. wireless industry revenues to expand 4% in 2016; T-Mobile seen as the victor
T-Mobile seen as winner in Sprint's decision to bow out of 600 MHz incentive auction
Sprint, T-Mobile could combine network assets into a new company, analysts argue

Read more on