The U.S. smartphone carrier space is highly competitive, and the only way for the big four -- Verizon Communications (NYSE:VZ), AT&T (NYSE:T), Sprint (NYSE:S), and T-Mobile (NASDAQ:TMUS) -- to get ahead is to poach subscribers from each other. To do that, they'll need to shell out huge piles of cash to improve their networks and convince users that jumping ship is the right move.
So let's take a look at how much each company is spending, and whether or not these large capital expenditures can change the wireless landscape.
Hey big spender!
While carriers may spend their money in different ways, a recent FierceWireless article highlighted how much each carrier will spend on network improvements:
|Verizon||$17.5 billion to $18 billion|
|Sprint||$15 billion (over the next three years)|
|T-Mobile||$4.4 billion to $4.7 billion|
So, where is all of this money going? For Sprint and Verizon, much of it will be spent building out networks through small cell technology and carrier aggregation, though both will likely spend some money to build larger cell towers as well.
Sprint is looking to small cells to cheaply (and effectively) expand its current coverage and fill in the gaps where its connectivity is weak. Verizon's plans are similar, though the carrier is more likely to use the small cells to strengthen already strong connections, instead of expanding coverage to the same degree Sprint is doing.
And as for carrier aggregation, this will allow carriers to use existing spectrum in more efficient ways by combining wireless bands together, according to FierceWireless. Qualcomm says carrier aggregation gives cellular users faster download speeds and higher data rates with lower latency. At the same time, it gives network operators the ability to use their networks in the most effective ways, and provides them with higher network capacity.
T-Mobile will focus on MIMO technology to build out its network, while AT&T will look to spend some of its money to build out LTE coverage in Mexico. I've written before about T-Mobile's focus on MIMO technology, which adds additional antennas to existing towers to make LTE signals more consistent and improve upload and download speeds.
What's interesting about AT&T spending money on its Mexico plans is that for a while the carrier has wanted to build a cohesive network in the country that its U.S. customers could tap into -- but T-Mobile beat AT&T to the punch. Last month, T-Mobile launched its Wireless Without Borders plan, which allows customers to call, text, and use data in Mexico and Canada just like they do in the U.S., at no extra charge.
How this all plays out
If we take a quick look at the numbers again, we can see that Verizon and AT&T are far outspending Sprint and T-Mobile. This doesn't come as much of a surprise, as the nation's top two carriers hold the vast majority of subscribers and bring in far more revenue. That's allowed them to build up larger cash reserves to spend on their networks and, ultimately, continue to solidify their positions at the top.
While T-Mobile and Sprint will spend lots of money to improve their networks, they'll likely still fall short of Verizon and AT&T's upgrades. It's more likely that Sprint and T-Mobile will be able to gain slight advances against each other as they fight for third place in both network quality and subscribers.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool both recommends and owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.