T-Mobile US (NYSE:TMUS) CEO John Legere said he expects "dark horse" companies like Google (NASDAQ: GOOG), Comcast (NASDAQ: CMCSA) and Charter Communications (NASDAQ: CHTR) to bid in next year's incentive auction of 600 MH broadcast TV spectrum. Legere said the next six to 12 months are going to be a "fascinating time period" in the industry as the future of the wireless market takes shape as more content goes online and more Internet traffic goes mobile.
"I do expect some dark horses to show up," Legere said during T-Mobile's third-quarter earnings conference call. "And I think the dark horses showing up is nothing more than clarity for what we all are expecting as an industry."
Legere repeated his contention that it's "crazy" to assume that the Tier 1 wireless carriers are going to be the ones controlling the wireless industry structure either by becoming vertically integrated businesses or moving horizontally into adjacent industries. Legere disparaged Verizon's (NYSE: VZ) Go90 over-the-top mobile video service as one example of that, and called it "a curated video service no one asked for" that is "clearly not going to fly."
It's unclear, though, whether non-traditional players will participate in the incentive auction. A Dish Network (NASDAQ: DISH) executive said earlier this month the satellite firm may participate in the auction and is currently evaluating its options. In May, Charter filed comments with the FCC that agreed with many of the policy proposals of smaller carriers, but it's unclear whether Charter will take part; Charter has declined to comment on the matter, according to a CNET report earlier this month. Google might participate, potentially in a consortium of non-traditional players, but there's no certainty the search giant will take part, the report added, citing unnamed sources. Google also declined to comment, according to CNET.
There have been reports this month that Comcast will execute on its MVNO deal with Verizon and look to launch a Wi-Fi-first wireless calling and data service. Comcast is in a "test-and-learn mode" when it comes to the combination of Wi-Fi service and cellphone service, said Comcast cable chief Neil Smit during Comcast's third-quarter earnings conference call with investors this morning. And, according to Deadline, Comcast CEO Brian Roberts said that the company has "always felt it [wireless] is part of a product set," but he said the company doesn't "necessarily have to seek owner's economics."
Regarding Comcast specifically, Legere said that he thinks Comcast will make use of its MVNO agreement with Verizon but that such a play that piggybacks on Verizon's cellular network might not be a long-term strategy. "The question is, could you ever see a long-term future where being an MVNO through Verizon is the strategy Comcast would use for mobility without owner's economics, etc.?" Legere said. "I find that hard to believe."
Further, Legere said that if Comcast gets enmeshed in wireless and Google's Project Fi MVNO takes off (which uses a combination of T-Mobile, Sprint (NYSE: S) and curated Wi-Fi network access), that would force the FCC to realize that there are more wireless competitors that it thought, which could lead to a shakeup of the industry structure.
T-Mobile CFO Braxton Carter said the incentive auction will be "transformational" for the carrier by giving it access to more low-band spectrum with better propagation characteristics, which he said will let T-Mobile expand its coverage footprint, provide better service in buildings and help reduce churn. He added that T-Mobile does not plan to access the equity markets to finance spectrum purchases in the auction and has "more than adequate cushion" in the debt markets to fund its bidding.
Meanwhile, T-Mobile executives discussed how they plan to continue expanding the company's LTE network and purchase more 700 MHz A Block spectrum. T-Mobile owns 700 MHz A Block spectrum covering 190 million POPs and has deployed the spectrum to nearly 175 million people. Legere disclosed that T-Mobile is nearing deals to acquire more A Block spectrum covering an additional 20 million POPs, including cities like Las Vegas; New Orleans; Norfolk, Va.; Phoenix; San Diego; and Tucson, Ariz. Carter said that 700 MHz spectrum holders will see their ability to sell their spectrum to T-Mobile diminish as the incentive auction approaches since T-Mobile is looking to pick up more low-band airwaves at auction.
T-Mobile CTO Neville Ray said that the "lion's share" of the new 700 MHz spectrum is unencumbered by Channel 51 interference and once T-Mobile secures it, the airwaves will be deployed at a "very fast" pace, with radios and base stations placed at existing cell towers.
Overall, T-Mobile's LTE network now covers 300 million POPs, and Ray said T-Mobile will aim to expand that to 305 million by year-end, compared to Verizon's 308 million and AT&T Mobility's (NYSE: T) 310 million. Ray said next year T-Mobile will do more coverage overlays to enhance and densify its LTE network in areas where it is deploying 700 MHz spectrum. However, he said that over the last 12 to 18 months, the pace at which T-Mobile has been able to clear and deploy its 700 MHz spectrum has been a "huge, huge lift for the business."
T-Mobile COO Mike Sievert noted that more and more devices, including Apple's (NASDAQ: AAPL) iPhone 6s and 6s Plus support Band 12 on T-Mobile's 700 MHz spectrum and that when T-Mobile customers have 700 MHz devices in 700 MHz markets, that has led to "a lot lower churn," which Sievert expects to continue as more 700 MHz spectrum gets deployed.
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