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Thread: Why Sprint & TMobile Need to Merge

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    Why Sprint & TMobile Need to Merge

    Because they don't have the capital, customer size or spectrum (in Tmobiles case) to build out 5G on their own. This story is backed up by Verizon's recent fiber buys (37 million miles of fiber) and their backing the FCC's One Touch Make Ready proposal so they can build out fiber quickly in areas where they are not the ILEC.

    Verizon's aggressive moves to build out fiber outside of their own backyard for 5G, it looks like they are in talks buy out of area fiber providers like Zayo as they did with XO (XO also provided a lot of millimeter band 5G spectrum).

    At some point there will not be enough room on poles for new to attachments so at that point someone like TMobile will be on the outside looking in and unable to provide 5G in that space or more likely they will become a customer for whatever company that wants to wholesale access to their fiber creating a revenue stream for their competitors. Small cell build outs require a lot of fiber to be useful.

    While Sprint is still looking to make its existing network up to par and TMobile is putting its resources into building out with its new 600 spectrum Verizon and AT&T will be building out 5G.

    https://arstechnica.com/information-...not-more-fios/

    https://www.telecomstechnews.com/new...ibre-proposal/

    http://www.verizon.com/about/news/on...-pole-position

    http://stopthecap.com/2017/07/17/wal...iber-buildout/

    Wall Street Grumbling About Estimated $130 Billion Needed for National 5G Fiber Buildout

    "Wall Street analysts are warning investors that mobile providers like AT&T, Verizon, T-Mobile and Sprint will have to spend $130-150 billion on fiber optic cables alone to make 5G wireless broadband a reality in the next 5-7 years.

    A new Deloitte study found providers will have to spend a lot of money to deploy next generation wireless service across the United States, money that many may be unwilling to spend.

    “5G relies heavily on fiber and will likely fall far short of its potential unless the United States significantly increases its deep fiber investments,” the study notes. “Increased speed and capacity from 5G will rely on higher radio frequencies and greater network densification (i.e., increasing the number and concentration of cell sites and access points).”

    Unlike earlier cellular technology, which worked from centralized cell towers that covered several miles in all directions, 5G technology is expected to be deployed through “small cell” antennas attached to utility and light poles with coverage limited to just 300-500 feet. To reach city residents, providers will need countless thousands of new antenna installations and a massive fiber network to connect each antenna to the provider.

    Telecom providers seeking financing for such networks will face the same criticism Verizon Communications took from Wall Street over the expense of its FiOS fiber-to-the-home upgrade as well as doubts about the viability of other fiber projects like Google Fiber.

    Goldman Sachs told its investors back in 2012 that throwing money at Google Fiber or Verizon FiOS was not going to give them a good return on their investment. That year, Goldman was “Still Bullish on Cable, But Not Blind to the Risks.” That report, written by analyst Jason Armstrong, noted Google’s fiber upgrades would cost billions and only further dilute industry profits from increasing competition.

    Goldman Sachs steered investors back to the cable industry, which gets significant praise from Wall Street for its ability to repurpose 20-year-old wired infrastructure for enhanced broadband without having to spend huge sums on a complete system rebuild.

    In 2013, Alliance Bernstein continued to slam Google Fiber’s buildout as an unwise business investment:

    "We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the US, as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business.

    For example, making the far from trivial assumption that Google can identify 20 million homes in relatively contiguous areas with (on average) similar characteristics as Kansas City when it comes to the most important drivers of network deployment cost, homes per mile of plant and the mix of aerial, buried and underground infrastructure, and that Google decides to build out a fiber network to serve them over a period of five years, we estimate the [total capital expenditure] investment required to be in the order of $11 billion to pass the homes, before acquiring or connecting a single customer."

    Some analysts are even questioning the relevance of 5G when providers investing in the massive fiber expansion required for 5G wireless could simply extend fiber cables directly into homes, assuring customers of more bandwidth and reliability. In many cases, fiber to the home technology is actually cheaper than 5G deployment will be.

    VantagePoint released a report in February that called a lot of the excitement surrounding 5G “hype” and cautioned it will not be the ultimate broadband solution:

    "Undoubtedly, 5G wireless technologies will result in better broadband performance than 4G wireless technologies and will offer much promise as a mobile complement to fixed services, but they still will not be the right choice for delivering the rapidly increasing broadband demanded by thousands or millions of households and businesses across America.

    Previous analysis of 4th generation (4G) wireless networks clearly demonstrated how these networks, even with generous capacity assumptions for the future, will have limited broadband capabilities, and inevitably will fail to carry the fixed broadband experience that has been and will be demanded by subscribers accustomed to their wireline counterparts. Although there is understandably much anticipation today about phenomenal possible speeds for 5G wireless networks tomorrow, they will continue to have technical shortcomings that will, like their predecessor wireless networks, render them very useful complements but poor substitutes for wireline broadband. These technical challenges include:

    Spectral limitations: 5G networks will require massive amounts of spectrum to accomplish their target speeds. At the lower frequencies traditionally used for wide area coverage, there is not enough spectrum. At the very high frequencies proposed for 5G where there may be enough spectrum, the RF signal does not propagate far enough to be practical for any wide area coverage. This is particularly important in rural areas where customer concentration is far, far less than what can be expected in densely populated urban areas where 5G may offer greater promise.

    Access Network Sharing: This is not a good solution for continuous-bit-rate traffic such as video, which will make up 82% of Internet traffic by 2020.

    Economics: When compared to a 5G network that can deliver significant bandwidth using very high, very short-haul frequencies, FTTP is often less expensive and will have lower operational costs. This is particularly true when one consider how much fiber deployment will be needed very close to each user even just to enable 5G.

    Reliability: Wireless inherently is less reliable than wireline, with significantly increased potential for impairments with the very high frequencies required by 5G.

    In 2014, PricewaterhouseCoopers LLP released a report urging telecom executives to shift their thinking about telecom capital spending away from one that focuses on upgrades to deal with increasing traffic and demand and move instead to a hardline view of only spending on projects that meet Return On Investment (ROI) objectives for investors.

    “The predominant task of management is to take a considered view of the future, allocate capital towards strategies that maximize value for the providers of that capital, and manage the execution of those strategies through to the delivery of returns for those investors,” wrote PricewaterhouseCoopers LLP. “For too long, telecoms have been on auto-drive for much of their capex. Departments assume if they had the money last year, they are going to get it again this year, under the premise of increasing traffic. But rarely do telecoms truly analyze that spending for its ROI or ask whether the investment should be made at all.”

    In short, if a project is not certain to quickly deliver significant ROI, serious questions should be asked about whether that investment is appropriate to undertake. That reluctance is at the heart of Deloitte’s new study.

    Deloitte notes if providers cannot overcome Wall Street’s reluctance to support major spending on fiber infrastructure, lack of investment will be even more costly.

    It predicts falling short on fiber deployment will cause a dwindling number of broadband provider choices for consumers. Today, fewer than 33% of U.S. homes have access to fiber broadband and only 39% have the option of choosing more than one provider capable of meeting the FCC’s minimal definition of broadband – 25Mbps. As competition declines, the need to further expand is reduced while prices can freely rise.

    PricewaterhouseCoopers LLP also recommends cable and phone companies partner with content providers like Netflix or Google, and let those companies take an ownership interest in return for capital investments for fiber upgrades. Those type of solutions also protect Wall Street from a feared price war should alternative providers launch in markets that are barely competitive, if at all.""

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    not including the new 600mhz auctions, isn't there a lot of spectrum/coverage overlap between native sprint and tmobile?

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    Quote Originally Posted by Qt0 View Post
    not including the new 600mhz auctions, isn't there a lot of spectrum/coverage overlap between native sprint and tmobile?
    Sprint has a nationwide sliver of band 26. T-Mobile doesn't need this. Sprint has some 1900 MHz, which T-Mobile would find nice to have, but many T-Mobile phones don't have band-25. Sprint's 2.5 GHz holdings are interesting for deployment of 5G. It's actually a hodge-podge of Sprint-owned licenses and licenses leased from educational institutions. On balance, T-Mobile doesn't need Sprint's licenses as much as Sprint needs a sugar-daddy. 20-40 MHz of the 2.5 GHz would be nice to have.
    Donald Newcomb

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    Quote Originally Posted by DRNewcomb View Post
    Sprint has a nationwide sliver of band 26. T-Mobile doesn't need this. Sprint has some 1900 MHz, which T-Mobile would find nice to have, but many T-Mobile phones don't have band-25. Sprint's 2.5 GHz holdings are interesting for deployment of 5G. It's actually a hodge-podge of Sprint-owned licenses and licenses leased from educational institutions. On balance, T-Mobile doesn't need Sprint's licenses as much as Sprint needs a sugar-daddy. 20-40 MHz of the 2.5 GHz would be nice to have.
    Do you think a Dish/Tmobile combined company would be a better fit?
    I'm not sure what Dish has planned, but they have a lot of assets and nothing really built to utilize any of it

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    Ten years without making a profit, unfortunate strategic business decisions, debt, and creative accounting to make the books look better than they really are, have left Sprint as a toxic husk of a business. Sure they have lots of assets. They also have lots of liabilities. Considering only the assets of a merger partner and ignoring the liabilities does not a good business plan make.

    Son has been going around hat-in-hand trying to get something to cut his losses. So far T-Mo and Charter have declined. Most recently Son solicited Warren Buffet and Malone to invest. If they pass, it will likely be the end of Sprint as we know it. They may have to take a chapter 11 bath and wash that debt right out of their hair.

    It may be a while before we hear about Buffet-Malone interest in investing in Sprint.

    I could be wrong. Maybe T-Mo, Charter, Buffet-Malone, and others are quietly planning a deal with Sprint that will take us all by surprise. I'm not betting on it.

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    Quote Originally Posted by Qt0 View Post
    Do you think a Dish/Tmobile combined company would be a better fit?
    I'm not sure what Dish has planned, but they have a lot of assets and nothing really built to utilize any of it
    In the majority of mergers, the combined company has a lower stock value than the sum of the the two companies did, pre-merger. The ones that make money in mergers is the investment bankers who broker the merger.

    Dish would be a bad merger partner for any rational company. Right now, they are at risk not only of losing their existing licenses for not building a network and offering substantial service, they may also be on the hook for the difference between what they bid for their returned AWS-3 and what they garner at reauction. Their management and customer relations style is notorious.

    AT&T's acquisition of DirectTV was a way for them to save U-verse, which wasn't really working out as expected for TV delivery.

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    Combining the 2 companies will not give them more capital, it will double their debt and take 3-4 years before realizing any economic synergies. The best path forward is an external investment from an adjacent industry (i.e Cable, Silicon Valley). Keep in mind, there is a lot more free spectrum being made available over the next few years (1700, 3.5, 6, 70, 80 etc..). If anything, we'll probably see another national carrier within the next 10 years.

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    Why Sprint & TMobile Need to Merge

    Wait for Sprint to get run down and T-mobile to stagnate in growth and then Google will come rescue both and roll them into Project Fi. It might happen or it might be planned that way?

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    Quote Originally Posted by b1geast View Post
    Combining the 2 companies will not give them more capital, it will double their debt and take 3-4 years before realizing any economic synergies. The best path forward is an external investment from an adjacent industry (i.e Cable, Silicon Valley). Keep in mind, there is a lot more free spectrum being made available over the next few years (1700, 3.5, 6, 70, 80 etc..). If anything, we'll probably see another national carrier within the next 10 years.
    If Sprints income stream allows them to spend say $3 billion on build outs and T-Mobile can spend $6 billion - together they can spend $9 billion which is increased income for the merged company. Synergies mean more positive income also. Debt management is a lot easier with more positive income.

    As far as free spectrum - you get what you pay for.

    When was the last time a wireless carrier built a nationwide network from scratch? Dish certainly can't, whatever Ergen is after deal wise hasn't been of interest to any possible partner and I'll bet he's talked to every possible partner by now with no takers. Amazon may be talking about it but imo that's unlikely. Maybe Amazon rides another carriers coat tails as an MVNO.

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    If either one ever wants to scales up eventually, somebody is going to have to make a move.
    In a world full of Droids, I'm a shiny Apple.

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    Interesting to note that only higher frequency spectrum will be considered for the 5G standard. Sprint is busy trying to get them to consider band 41 as 5G though I've read they will get that. Right now no matter what speeds Tmobile is able to pump out without higher band spectrum they won't be able call whatever they have as 5G. Unless I'm wrong does Tmobile have any higher band spectrum over 2.5ghz?

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    Quote Originally Posted by offthegrid View Post
    Interesting to note that only higher frequency spectrum will be considered for the 5G standard. Sprint is busy trying to get them to consider band 41 as 5G though I've read they will get that. Right now no matter what speeds Tmobile is able to pump out without higher band spectrum they won't be able call whatever they have as 5G. Unless I'm wrong does Tmobile have any higher band spectrum over 2.5ghz?
    I was watching T-Mobile's quarterly earnings call. Their CTO, Neville Ray, talked about 5G and the use of 600 MHz to provide 5G. He said that T-Mobile was going to be deploying 5 GHz on their small cells and was looking very hard at 3.5 GHz. He hinted that 40 MHz of 2.5 GHz would be nice to have but they were being very circumspect about what was said specifically re Sprint and someone may have kicked him under the table before he said too much.

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    Quote Originally Posted by DRNewcomb View Post
    Sprint has a nationwide sliver of band 26. T-Mobile doesn't need this. Sprint has some 1900 MHz, which T-Mobile would find nice to have, but many T-Mobile phones don't have band-25. Sprint's 2.5 GHz holdings are interesting for deployment of 5G. It's actually a hodge-podge of Sprint-owned licenses and licenses leased from educational institutions. On balance, T-Mobile doesn't need Sprint's licenses as much as Sprint needs a sugar-daddy. 20-40 MHz of the 2.5 GHz would be nice to have.
    Agreed, There is nothing that T-Mobile needs from Sprint spectrum wise. Yes, the 2.5 Ghz would be nice. Neville Ray said yesterday he thinks the CBRS 3.5Ghz-4.0Ghz spectrum is what he likes most for 5G. With the 600 Mhz T-Mobile is just three blocks short of Verizon spectrum. Sprint needs a Sugar Daddy and T-Mobile doesn't have to money to help Sprint.

    I worry that a Sprint & T-Mobile deal could bankrupt them with all the debt. Just too much risk for the reward if the big migration goes bad or they don't have enough money to deploy 5G. I am sure the FCC would force any merger of the two to sell a lot of spectrum since combined they own more spectrum than AT&T, Verizon, US Cellular and Cspire combined. They can't sell Sprint's band 26 till all the Sprint customer migrate that would take years to sun-set that band 26. If they are forced to sell the 2.5 Ghz then what is the value to T-Mobile in the first place?

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    How much high band does TMobile have now or is it mid band?

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    Quote Originally Posted by offthegrid View Post
    If Sprints income stream allows them to spend say $3 billion on build outs and T-Mobile can spend $6 billion - together they can spend $9 billion which is increased income for the merged company. Synergies mean more positive income also. Debt management is a lot easier with more positive income.

    As far as free spectrum - you get what you pay for.

    When was the last time a wireless carrier built a nationwide network from scratch? Dish certainly can't, whatever Ergen is after deal wise hasn't been of interest to any possible partner and I'll bet he's talked to every possible partner by now with no takers. Amazon may be talking about it but imo that's unlikely. Maybe Amazon rides another carriers coat tails as an MVNO.
    Amazon is facing Anti-Trust voices now in Washington DC in their take over of Whole Foods. Jeff Bezos, Amazon's chief executive owns the Washington Post that is very Anti-Trump newspaper that Trump hates. I'm not sure Amazon could buy anything as big as a major cell phone network now.

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