Source: T-Mobile
Much like everything else that T-Mobile (TMUS 0.01%) is doing these days, the Un-Carrier is being aggressive with improving its network. The company has spent over two years modernizing its network, and it has a lot to show for it. T-Mobile now has the fastest 4G LTE network in the U.S.
A big part of T-Mobile's network modernization strategy includes scooping up as much low-band spectrum as it can. To that end, T-Mobile is now trying to get some 700 MHz spectrum from Frontier Communications (FTR +0.00%) as well as an individual spectrum holder, according to FierceWireless.
A long and winding road of spectrum deals
This is but the latest in a long string of low-band spectrum transactions that T-Mobile has completed recently. Perhaps the most notable was when T-Mobile bought some 700 MHz A-Block spectrum from Verizon (VZ 1.06%) earlier this year for $2.4 billion. That deal dramatically improved T-Mobile's spectrum position in several key markets like Los Angeles and New York City, among others.
Source: T-Mobile
The deal with Verizon put a notable dent in T-Mobile's cash reserves, with the company ending last quarter with $3.1 billion in cash. Still, this transaction was well worth it given the importance of low-band spectrum.
Just last month, T-Mobile purchased additional 700 MHz A-Block licenses from CenturyLink subsidiary Actel.
Why low-band matters
Low-band spectrum is important for a slew of reasons. Low-band signals can penetrate buildings better, providing better indoor coverage compared to mid-band spectrum. It also travels farther, which allows carriers to build fewer cell towers, saving on capital expenditures in the process.
For instance, here's T-Mobile CFO Braxton Carter at an Oppenheimer tech conference last month:
The low-band spectrum is also much more capital efficient. The rule of thumb is one macro of low band is equivalent to three mid-band sites. So, magnitude more efficient from a capital expenditure standpoint.
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So, all in all, we think the low band is a real game changer. Roughly half of the 150 million A-block POPs we have was clear to begin with, but we've recently cleared 13 million additional POPs and are aggressively working at clearing the remaining parts. Some of it will have to wait for the broadcast option.
Looking farther out, the FCC is conducting a low-band spectrum auction next year. The auction was originally scheduled to take place this year, but regulators delayed it until 2015 in order to hammer out new rules. A few months later, the FCC voted to limit how much spectrum AT&T and Verizon can buy, since the two largest domestic carriers already have ample low-band licenses.
There's more where that came from
Participating in spectrum auctions can be pricey, and AT&T and Verizon also have much larger war chests than their smaller rivals. T-Mobile hasn't ruled out the possibility of raising additional capital in order to participate in the upcoming auctions.
The company raised both equity and debt capital late last year, but Carter noted on the last conference call that future possible capital offerings would preferably be debt. That's good news for shareholders, because debt capital is cheaper than equity capital and shareholders don't want any more dilution.
T-Mobile is firing on all cylinders right now, both from a technical standpoint with improving its network as well as with marketing and conveying its value proposition to consumers. CEO John Legere has made it quite clear that T-Mobile isn't letting up on the aggression anytime soon.
