T-Mobile Ready to Deploy 5G on Sprint Spectrum; AT&T Talking With Investor
Integration plans between T-Mobile and Sprint are further along than expected, since the deal has taken longer than expected to complete, said T-Mobile CEO John Legere on a Q3 call Monday. “The silver lining is that we have had more time to prepare for the coming integration,” Legere said: “We have detailed integration plans and we are preparing to start deploying Sprint’s 2.5 GHz spectrum soon after closing” on buying that smaller company. He said with the state attorneys general court case to be heard in December, 19 state governments have now endorsed the deal.
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“We continue to be open to, and are having, many discussions with the state AGs,” the executive said. Legere predicted the transaction will close in early 2020. Also Monday, AT&T settled with an investor.
Legere said a settlement with the states is still possible. “We violently agree” with the states on what’s important on 5G, Legere said. T-Mobile shares concerns about pricing, coverage and the low end of the market, he said. “There have been very good discussions” with the states “and we continue to have those,” he said.
T-Mobile's “accelerating" 5G buildout, and plans to deploy the “foundational” level of the network this year, Legere said: “Our 600 MHz spectrum will be the foundation for our 5G network and it's live in nearly 8,300 cities.” Legere said customers have more than 26 million devices that are 600 MHz compatible. The high-band spectrum used by other carriers “can be blocked by things like walls, glass and leaves,” he said.
Even if the deal doesn’t go through, T-Mobile projected a bright future with continued growth. “We have not skipped a beat,” Legere said. The carrier said it grew faster than other U.S. carriers, with 1.7 million total net adds in Q3, including an industry leading 1.1 million branded postpaid net adds. Churn was 0.89 percent. Total revenue was $11.1 billion, up 2 percent. Profit rose about 9 percent to $870 million.
AT&T officials stressed its long-term financial stability in its Q3 release earlier Monday. AT&T released a three-year financial plan that calls for 1-2 percent per year consolidated revenue growth, earnings growth and debt reduction. The company also pledged to make no additional major acquisitions.
Investment funds managed by Elliott Management co-CEO Paul Singer recently took a major stake in AT&T, seeking increased strategic focus, improved operational efficiency, enhanced leadership and oversight and other changes (see 1909090020). The telco will see two directors retire in the next year and a half. "Subject to Board approval, the company expects to add a new director at its next Board meeting, followed by another director in 2020" and those people will have "skill sets that align with the objectives laid out today." Its chief will remain CEO through at least 2020. "Chairman and CEO roles will be split following [that] retirement," New Street emailed investors.
“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” said the CEO, Randall Stephenson. “Our three-year plan delivers both substantial and consistent financial improvements over the next three years.”
“The plan that AT&T announced today is something only a hedge fund manager could love,” said Communications Workers of America President Chris Shelton. “Instead of using its massive profits to increase investment in next generation wireless and fiber broadband networks and train its employees for jobs of the future, AT&T plans to spend $30 billion buying back its own stock to boost share prices. Our union will continue to oppose Paul Singer’s agenda and keep a close eye as AT&T conducts its portfolio review.” AT&T’s strategic thinking has “benefited from robust engagement with our owners, and that includes Elliott Management,” Stephenson told analysts, saying his talks with Elliott have been “constructive as well as helpful.”
AT&T announced 255,000 phone net adds Q3, including 101,000 postpaid. Stephenson told analysts all of AT&T’s investments are based on two assumptions: “Consumers will continue to spend more time viewing premium content,” he said: “Businesses and consumers will continue to demand more connectivity more bandwidth and more mobility.” AT&T expected a world where consumption of video is no longer bound to the living room, he said: “Everything we expected has arrived and it has arrived sooner than we or anyone else anticipated.”
AT&T’s FirstNet buildout “gives us a big lead in getting towers 5G-enabled and getting our network ready to be a national 5G network next year,” said Chief Financial Officer John Stephens. Fifth-generation adoption should “boost equipment sales as we launch our nationwide 5G network in 2020,” he said. Stephenson said AT&T will continue to deploy fiber because of 5G and it has the money to buy more spectrum if needed.
The theme of AT&T’s earnings is “hope is not a strategy,” MoffettNathanson’s Craig Moffett told investors. “Will investors buy the story that a high fixed-cost business like AT&T is going to spin declining revenues into higher EBITDA and higher free cash flow?” he asked: “Year after year for the next three years?”