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Eric Kowalski

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  • Update: T-Mobile Earnings And Acquisition [View article]
    Good article...

    The only issue with the valuation is with the CAPEX numbers. Did you consider the 700 MHz, 600 MHz spectrum network roll-outs as well as the added costs for network upgrades due to increased subscribers in your future CAPEX forecasts? The network is decent at the moment, but as more subscribers sign up and network quality becomes an issue it will cost TMUS in terms of CAPEX (not just to keep the network from degrading) but to improve its network quality as more end-users join to decrease churn.
    Aug 6 06:07 PM | Likes Like |Link to Comment
  • China Telecom, Unicom Rush Into 4G [View article]
    Humble Eagle...

    Please see below for an answer to your question...

    T, VZ, S and TMUS have all implemented FDD-LTE networks, but S is the only company that has the frequency (2.5 GHz) to launch a TDD-LTE network - this is where Spark comes into play. Both T and VZ have built out their LTE networks on frequencies below 1 GHz which have great propagation (the signal will travel further and has better in-building penetration) so compared to let's say TMUS which built their LTE network using 1.7 GHz, T and VZ need only 50% of the sites and will have better coverage. The speed is due to the amount of MHz (5 MHz to 20 MHz maximum) and the more MHz the faster the speeds. Where T, VZ and TMUS are rolling out FDD networks with 10 MHz, S is rolling out it's FDD network with only 5 MHz. However, Sprint's TDD network is being rolled out in the urban areas where subscribers will have extraordinary speeds much better than T, VZ or TMUS.

    There are quite a few differences between TDD and FDD, but I have listed three that are the most interesting:

    1) TDD does not require paired spectrum (the uplink and the downlink are on the same channel) where as FDD requires paired spectrum (the uplink is on a different channel from the downlink) and allows for simultaneous uplink and downlink. FDD was developed as a migration from the Western 3G systems (primarily WCDMA) which uses paired spectrum. TDD was developed as a migration from the Chinese technology TD-SCDMA.

    2) The uplink and downlink capacity for FDD is bound by government regulators (the paired spectrums) and it is not possible to adjust or make any dynamic changes to match traffic patterns or capacity. TDD can be dynamically changed to match different uplink and downlink traffic pattern demands.

    3) FDD has 25 paired frequency bands and 10 of which are under 1 GHz. TDD has 11 frequency bands and none of which are under 1 GHz.

    Hope this helps a bit...
    Feb 16 11:29 PM | Likes Like |Link to Comment
  • Sprint soars on subscriber gains, adjusted EBITDA forecast [View news story]
    There were some interesting comments from earnings call today, but the one that struck me as unusual is that Sprint is launching markets (clusters) with seemingly less than 70% of the sites complete. If 33k sites are complete out of 39k sites which is approximately 85% of all sites completed and with >37k sites construction complete/underway that means 95% of all sites, theoretically, should be completed and on-air by the end of March 2013. The comments in the call and the information in the slide deck are contradictory which is unfortunate.

    I doubt that NWV will be finished by Q2 if they still have 30% gaps in these markets which are the most difficult sites to build. The main concern is that if NWV is delayed Spark will also be delayed (unfortunately).

    At the start of Q3 2011 Sprint promised that by the end of 2013 NWV would reach 250 POPS but they only hit 200 POPs (at least a 6 month delay).
    Feb 11 03:19 PM | Likes Like |Link to Comment
  • Sprint And T-Mobile US - A Winning Proposition [View article]

    Thank you for your comments and apologies for not answering your question sooner.

    There certainly is a possibility for the 600 MHz auction to be delayed past the middle of 2015 due to a merger between S and TMUS. However, I do not believe the FCC will significantly delay the auction date. The main issues now are whether the software will ready and functional by the auction date and how the FCC will decide the rules for the auction. I do not believe a potential merger will delay the rules from being settled and therefore the auction will stay the course. Also, I doubt the FCC will delay its own mandate to free up 300 MHz of spectrum for MBB by 2015 due to a potential merger between S and TMUS.

    1) The number of licenses is the major area of contention where T and VZ want a lower number of licenses based on economic areas (176 license areas) versus S, TMUS, etc. which want a larger number of licenses based on cellular market areas (734 license areas). If there is a merger between S and TMUS then it is possible the new entity would back the EA license approach rather than the CMA license approach. T and VZ have threatened not to participate in the auction if the rules don't favor the EA approach and that could be a deal breaker. T and VZ are expected to spend $20+ BUSD where S and TMUS are only expected to spend less than $10 BUSD combined.

    2) S has said that they are happy with their spectrum holdings and we should see improved rural coverage in the next couple of years as they will build out new sites in the rural areas. TMUS just purchased 700 MHz spectrum from VZ and will build out that network over the next couple of years. I still think both companies need to increase their holdings of spectrum under 1 GHz and this auction gives them an great opportunity.

    3) We can also think about the amount of debt that the new entity would have on its balance sheet might deter it from purchasing large amounts licenses in 2015 not to mention the additional CAPEX that would have to spent to build out the network which adds another layer of complexity.

    Delaying the auction due to a merger does not make sense from a policy or an efficiency point of view.

    I hope this answers you question.
    Feb 11 02:33 PM | 1 Like Like |Link to Comment
  • Sprint And T-Mobile US - A Winning Proposition [View article]
    Thank you for your kind words.

    1) Yes, it will be contentious but it is better than the alternative of not being able to realize the synergies. Contracts will have to be amended and an organization put into place to ensure that OPEX savings are realized.

    2) The argument in regards to pricing will be tricky indeed, but not impossible. The argument is that a shared network will create a better "value" network for consumers. The other argument is that the incentives to raise prices are not purely based on profit
    and where unilateral or coordinated effects will not be an issue.

    Jan 20 12:34 AM | Likes Like |Link to Comment
  • Sprint And T-Mobile US - A Winning Proposition [View article]
    I believe the spectrum from Verizon is factored into the acquisition price.

    I could write another article regarding your question about Dish, but will keep it simple for now. I think they will fight it, but as a means to an end. Dish wants to enter the market and can it in one of three ways. 1) Purchase TMUS, 2) Enter into a MVNO agreement, 3) Build its own network. However, each one of these options require a considerable amount of capital. 1) Dish was not able to win the bidding war with SoftBank for the Sprint acquisition so I doubt they would be able to win the bidding war this time around. 2) A MVNO agreement will mean that there will be five players in the industry and to do that AT&T and Verizon will have to agree for Dish to use there lower frequency spectrum - which will be a difficult sell. 3) A new network will take 3 to 5 years to build.

    Dish might use the merger as leverage to enter the market where it would get spectrum from Sprint, a discounted MVNO agreement (4 players are better than 5) and they can build out their own network having a nice mix of low and high UHF spectrum.

    The break-up fee will consist mostly of spectrum and enough capital to build out a basic network, but nowhere near the AT&T break-up fee numbers.

    Also, I think a reverse merger can't be ruled out - Sprint mergers into TMUS (remember that the T-Mobile and Metro PCS was a reverse merger). This has its advantages and especially if it keeps the "maverick" firm brand in the industry. I think one main reason you are seeing Sprint and T-Mobile focusing their competition on AT&T and Verizon rather then on each other is because it they start to openly compete with each other their arguments towards the regulators will lose merit.
    Jan 20 12:21 AM | 2 Likes Like |Link to Comment
  • Alcatel-Lucent Is Moving In The Right Direction [View article]
    The big issue for whoever acquires the unit will be the pension obligations and the consolidation of resources.
    Jan 17 01:04 AM | 1 Like Like |Link to Comment
  • Sprint And T-Mobile US - A Winning Proposition [View article]
    Thank you for your question. I think Sprint will offer a fair market value for TMUS and possibly go a bit higher to defend against a bidding war; I cannot see Sprint low-balling the price. Sprint needs TMUS more than TMUS needs Sprint and after we are able to compare the fourth quarter net subscriber numbers between Sprint and TMUS it will become clearer. Also, TMUS is purchasing A Block spectrum from Verizon which makes TMUS even more attractive to Sprint and to others e.g. Dish. I believe Dish also needs TMUS mainly because it does not have its own wireless network and to build a new network from scratch will take years to complete.
    Here is an interesting fact - TMUS has a market cap of $24 billion and an enterprise value of $42 billion...that is a lot of debt whoever purchases TMUS. If and when the bid is official, I will be interested to review the terms and conditions especially the break-up fee.
    Jan 13 07:34 AM | 1 Like Like |Link to Comment
  • Sprint And T-Mobile US - A Winning Proposition [View article]
    Thank you for all the of the comments...I really appreciate all of the thoughtful ideas and analysis...

    Hope you enjoy the next articles...
    Jan 11 05:47 AM | Likes Like |Link to Comment