T-Mobile 1Q20 CapEx Bounces Back

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T-Mobile (NASDAQ: TMUS) wasted no time in bouncing back in 1Q20 from the slowdown in the second half of 2019 as pending approval for its merger with Sprint overhung the industry. Since the deal closed on April 1, TMUS is setting the pace on network integration and expansion with 5G deployments.

Even before the close date, TMUS ramped up its capital expenditures (capex) for 1Q20 coming in at $1.8 billion, up 52 percent from $1.2 billion in 4Q19 but down 9 percent from $1.9 billion in 1Q19. 

Capital intensity (aka, capital efficiency) which is the ratio of capex to service revenues was 20 percent in 1Q20 versus 13 percent in 4Q19 and 23 percent in 1Q19. Any measure below 15 percent indicates slower network activity in more of a maintenance mode. Clearly, TMUS has rocketed back into expansion mode.

With COVID-19 impacts, TMUS limited its guidance to 2Q20 without projecting revenues or costs. It did say, however, it would remain active with its Sprint network integration and 5G deployment plans. The company expects to invest $2.2-2.4 billion, excluding capitalized interest, in 2Q20. Even if service revenues remain flat, capital intensity rises further to an estimated 26 percent. 

TMUS has a lot of fire power. Its spectrum holdings are among the best in the industry. At the end of 1Q20, TMUS itself controlled an average of 111 MHz of spectrum nationwide in low- and mid-band spectrum. With Sprint, TMUS now controls 319 MHz of low- and mid-band spectrum nationwide, more than either Verizon Wireless or AT&T Mobility. This swath includes an average of 55 MHz in the low-band including 31 MHz of 600 MHz spectrum that TMUS already owned and 264 MHz in the mid-band, mainly 2.5 GHz spectrum garnered from Sprint. TMUS values highly both 600 MHz and 2.5 GHz frequencies for its 5G future.

The company was the big winner in FCC Auction 103 for 37/39 GHz and 47 GHz millimeter wave (mmW) spectrum, Inside Towers reported. By combining each company’s spectrum holdings, TMUS now controls 1,160 MHz of mmW nationwide. Across all bands, the company has a total national average spectrum depth of nearly 1,500 MHz, second only to Verizon.

These bands form TMUS’ spectrum “layer cake,” that is, low-band for nationwide coverage, mid-band for metro areas and high-band mmW for dense urban applications. This combination gives T-Mobile considerable leverage in how and where it expands its 4G LTE coverage and deploys 5G nationwide.

In 2Q19, TMUS first turned up its 5G network using mmW spectrum, now in parts of seven cities. Once the deal closed, TMUS deployed its first 5G sites on Sprint 2.5 GHz spectrum in Philadelphia and recently in New York City, with multiple other cities to follow in 2020.

Since its 4Q19 launch, TMUS’s 5G footprint at 600 MHz is now on air in 49 states and Puerto Rico, with Alaska set to launch in May 2020. The company says its 5G network covers 215 million people in almost 6,000 U.S. cities and towns.

It’s pedal to the metal for TMUS! The company added 1,600 5G sites in 1Q20 and stepped up the pace with another 1,000 sites in April.

The combined TMUS/Sprint network covered 327 million people at the end of 1Q20. Equipment is installed at nearly 67,000 macrocell sites along with 26,000 small cell and distributed antenna system (DAS) sites.

The company noted that Sprint network integration activity is proceeding apace with network planning, site rationalization and permitting processes already well underway. TMUS expects the full network integration will take approximately three years to complete.

By John Celentano, Inside Towers Business Editor

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