T-Mobile Rides Growth Momentum into 2021

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“This business is firing on all cylinders,” enthuses Mike Sievert, T-Mobile (NASDAQ: TMUS) CEO. The company reported service revenue and customer gains for 4Q20 and full-year 2020, reflecting the integration with Sprint and an aggressive 5G network build program.

Since finalizing the merger on April 1, 2020, TMUS has grown its postpaid and prepaid customer base to 102 million, second only to Verizon’s 120 million. In 2020, TMUS achieved its “highest ever” 5.5 million postpaid net additions. The company is projecting another 4.0-4.7 million postpaid net additions in 2021.

TMUS’ service revenues grew to $50.4 billion for full-year 2020, up from the TMUS-only $34.5 billion in 2019.

The big story is TMUS’s progress with its 5G deployments as it integrates and rationalizes network assets acquired from Sprint.

TMUS is deploying 5G under two main categories – Extended Range which utilizes 38 MHz of low-band 600 MHz, and Ultra Capacity which leverages the 156 MHz of 2.5 GHz mid-band spectrum acquired from Sprint. Ultra-Capacity will also use some of the nearly 1,200 MHz of millimeter wave spectrum that TMUS owns for network densification using small cells and for 5G Home Broadband fixed wireless access that the company is testing now.

Extended Range is the foundation layer of TMUS’ “layer cake” spectrum model. Extended Range deployments at year-end 2020 covered 280 million POPs in 9,100 cities and towns over an area of 1.6 million square miles. Download speeds are roughly twice as fast as current 4G LTE connections.

Ultra Capacity deployment now covers 106 million POPs in 2,400 cities and towns. The company touts Ultra Capacity performance with download speeds around 300 Mbps, peaking to 1 Gbps. TMUS is expanding its Ultra Capacity coverage at “an unprecedented pace” to reach 200 million POPs nationwide by year-end 2021.

The company’s network activity is reflected in its capital expenditures.

Quarterly capex ramped from the merger date through the end of the year. The $3.8 billion in 4Q20 accounted for 35 percent of the 2020 total. TMUS’ full-year 2020 capex reached $11 billion.

Note that the combined TMUS-Sprint pre-merger capex for full-year 2019 was $10.3 billion. TMUS’s 2020 capex represents a 7 percent year-over-year increase. The company is guiding 2021 capex to a midpoint of $11.8 billion, another 7 percent YoY increase.

By comparison, Verizon’s 2020 capex was similar at $10.5 billion but AT&T lagged at an estimated $7 billion. Both companies are guiding consolidated capex in 2021 to be flat with their 2020 guidance, with wireless capex for each estimated at $9-10 billion.

TMUS is projecting 2021 wireless service revenue growth of 2 percent to $51 billion. This translates to a wireless capital intensity of 23 percent, leading both Verizon’s and AT&T’s, estimated at 15-16 percent each.

TMUS’s network infrastructure is vast. At year-end 2020, the company operated an aggregate network of 108,000 4G LTE and 5G macro cell sites along with 69,000 small cells and distributed antenna systems. The company is decommissioning Sprint cell sites as it installs 5G.

Sievert emphasizes, “[The network team] is doing something that’s never been done before operating at this scale. It was many, many thousands of sites that had to be touched and upgraded with advanced 5G technology to get us to 106 million [POPs], let alone the 280 million [POPs] covered by Extended Range 5G. But that’s now moving to tens of thousands of sites in 2021 with Ultra Capacity 5G. It’s a massive undertaking. We started it back in 2018, planning and siting, permitting, design, in order to create a contiguous leading network.”

Including the company’s recent long-term deal with American Tower, many tower companies, large and small, are part of TMUS’ network integration.

In the process, TMUS realizes significant operating and integration synergies.

Peter Osvaldik, TMUS CFO states, “We delivered $1.3 billion in synergies in 2020 and we should expect synergies in 2021 between $2.7 billion and $3.0 billion.” Osvaldik points out that in 2020, about $700 million in network synergies came primarily from avoided new site builds and early decommissioning that should account for roughly half of the total projected 2021 synergies.

Integration activities will encompass the recent Shentel Wireless acquisition. Based in Virginia, Shentel Wireless operates in Virginia and in parts of surrounding states. It is the sixth largest U.S. wireless carrier serving 1.1 million retail customers with a network covering 6.3 million POPs and over $400 million in annual service revenues.

TMUS acquires Shentel Wireless under an affiliate agreement previously established between Sprint and Shentel. The sale includes over 1,900 macro cell sites although Shentel keeps its 220 towers and will lease tower space back to TMUS.

The deal, valued as a cash transaction of $1.95 billion, is expected to close in 2Q21.

By John Celentano, Inside Towers Business Editor

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