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Tag Archives: Jennifer Fritzsche

FCC Grants C-band Spectrum Licenses Worth $81 Billion

By Don Bishop

The FCC granted 5,676 licenses today for wireless operations in mid-band radio-frequency spectrum, also known as C-band spectrum in the range from 3.7 GHz to 3.98 GHz. The licenses went to high bidders in the FCC Auction 107 that concluded on Feb. 17. Twenty-one bidders spent about $81 billion for the licenses. “Today’s action keeps the transition of this band to flexible use on track, paving the way for carriers to use this spectrum to provide 5G and other advanced wireless services,” a statement from the FCC reads.

The FCC’s acting chairwoman, Jessica Rosenworcel, said, “These mid-band licenses are the sweet spot for 5G deployment. That’s because they have the right mix of capacity and propagation that will help us reach more people in more places faster. With these licenses in hand, more carriers can deploy mid-band 5G, which means faster speeds over much wider coverage areas and more robust competition.”

Among the bidders, Verizon Wireless, under its business name of Cellco Partnership, spent $45.5 billion for 3,511 licenses. AT&T spent $23.5 billion for 1,621 licenses. T-Mobile spent $9 billion for 142 licenses. U.S. Cellular spent $1.3 billion for 254 licenses. NewLevel II, a bidding entity for Grain Capital, spent $1.2 billion for 10 licenses. Canopy Spectrum, a joint venture of Jennifer Fritzsche and Ed Moise, spent $197 milllion for 84 licenses.

The initial authorizations have a term not to exceed 15 years from the date of initial issuance or renewal, the FCC said. The FCC imposed lengthy, detailed construction requirements upon the license-holders in an effort to see to it that they build facilities to put the spectrum to use.

Licenses in the A Block in 46 of the top 50 partial economic areas (PEAs) are subject to the accelerated relocation deadline of Dec. 5, 2021. Licenses in the B and C Blocks in the 46 PEAs and in the A, B, and C Blocks in the remaining 360 PEAs are subject to the Phase II accelerated relocation deadline of Dec. 5, 2023. Source: FCC

 

Satellite operators Intelsat, SES, Telesat, Eutelsat and Star One are working to clear the portion of the C-band that was auctioned, according to a story in Via Satellite. “The operators have agreed to clear the spectrum in exchange for relocation costs and incentive payments for clearing the spectrum on an accelerated timeline,” the story reads. “The FCC decided on $9.7 billion of accelerated relocation payments, most of which will go to Intelsat ($4.87 billion) and SES ($3.97 billion). The operators must first clear 120 megahertz of spectrum in 46 partial economic areas by Dec. 5, 2021. In a second phase, they must clear the lower 120 megahertz in the remaining areas, plus an additional 180 megahertz nationwide, by Dec. 5, 2023.”

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Don Bishop is executive editor and associate publisher of AGL Magazine.

Towers Will See Strong Growth in 2019

By J. Sharpe Smith, Senior Editor

Despite the 5G talk, investment in LTE will see plenty of runway in 2019, which is leading to more new tower builds, tower executives say. T-Mobile is building coverage sites for its low-band 600 MHz and 700 MHz spectrum, and AT&T is contemplating a network improvement project as well as its FirstNet-related project. Both of which involve ample new sites, Alex Gellman, CEO, Vertical Bridge, told AGL eDigest.

“We are in a renaissance period for good old macrotowers in the next few years ahead of 5G,” Gellman said. “The reason I feel that way is we are seeing a lot of rings for new towers. The economics and speed of collocations is hard to beat, but there will be new builds as well.

Ron Bizick, CEO, Tarpon Towers, described the new-build business as “vibrant.” It is bringing good times to the independent tower companies.

“There are a lot more towers being built in the rural areas to fill out the white spaces, particularly for AT&T’s FirstNet,” he said. “We are seeing the other carriers build out their coverage, as well. We have targeted some rural areas where we think a second tenant is possible, but only a second tenant.”

With that said, carrier capital expenditures are a quarter-by quarter-question mark. In the first quarter of 2019, tower owners will be looking closely at the capex budgets of AT&T and Verizon after the Big Two pulled back on their spend toward the end of 2018. AT&T’s reduced capex came after the Time Warner deal closed and Verizon shaved $1 billion off its guidance after announcing 44,000 in layoffs last year. Additionally, Verizon had a $4.6B write down of Oath (Yahoo and AOL).

“They pushed capex out at the end of 2018. Was that a trend or a one-time occurrence?” Gellman said. “The layoffs and the write down may be a signal a greater focus on the network in the future.”

Whither Sprint/T-Mobile?

Last year’s big story, the Sprint/T-Mobile merger, is carrying over to this year. It was bad news for some tower companies, which saw Sprint business go away after the deal was announced. Gellman believes the quiet surrounding the deal is a portent for its blessing from the Department of Justice. In the long run, he believes the merger will be positive for the industry.

“Sprint has not spent on its network in a meaningful way for a number of years, while T-Mobile has been very aggressive,” he said. “A stronger, larger T-Mobile will be excellent for our industry. T-Mobile is solely focus on its network, while AT&T and Verizon have other places to put their capital and have sometimes invested elsewhere than in the network. If T-Mobile is the same size as AT&T, it will be more difficult for it to do that.”

Jennifer Fritzsche, senior analyst, Wells Fargo, believes the Sprint/T-Mobile merger will go through in the first half of 2019. “Our regulatory checks suggest that the DoJ/FCC approval process has been relatively drama-free thus far,” Fritzsche wrote in an Equity Research note.  “We do, however, believe that T-Mobile will have to divest assets – most likely spectrum – to receive approval. The New T-Mobile plans to create a more scaled, viable competitor to AT&T and Verizon, and help turbocharge the carriers’ push to 5G.”

Towers Still a Wall Street Darling

Fritzsche has written that the towers will be remain a compelling investment for shareholders 2019, despite the possible Sprint/T-Mobile merger. Tower stocks beat the S&P index in 2018 (+4.9 percent vs. S&P -6.2 percent), and in 2017 (+40.4 percent vs. S&P +19.4 percent).

“Even with these recent moves, we believe towers will remain very topical in 2019,” Fritzsche wrote. “In our view, there exists a number of tangible catalysts (i.e., FirstNet, T-Mobile’s 600 MHz deployment, 5G densification efforts, edge computing, etc.), which should more than offset expected choppiness in international markets (particularly India) and impact from carrier M&A (namely Sprint and T-Mobile) in the short term.”

Carrier leasing activity, which has grown year over year in recent quarters, is expected to continue to increase in the coming 12 months, according to Fritzsche.

“There is much ‘naked spectrum’ that has yet to be deployed (600 MHz, FirstNet 700 MHz, AWS-3, WCS, 2.5 GHz, mmWave, etc.) – where towers will clearly play a role,” she wrote. “Most deployments are part of multi-year strategies designed by the carriers and complement what they plan to build for densification needs ahead of 5G technology rollouts.”

Verizon Telematics Expands with Telogis Buy

By J. Sharpe Smith

Senior Editor
AGL eDigest

July 6, 2016 — Verizon Telematics, whose “hum” consumer vehicle connectivity business contributed 176,000 connected device adds in Q1 of this year, has purchased Telogis, a fleet navigation Software-as-a-Service (SaaS) provider with distribution through Ford, General Motors, Hino, Isuzu, Mack and Volvo’s Class 8 truck unit.

“This unit should serve as a nice complement to VZ’s [consumer vehicle] telematics division,” wrote Jennifer Fritsche, senior analyst, Wells Fargo Securities, wrote. “We believe this acquisition represents an interesting strategic move to ramp up its scale in the telematics space.”

Verizon’s purchase of Telogis will create one of the largest telematics company in the United States and it marks the first time a wireless company has bought a telematics concern, according to Fritzsche.

“But we do not think it will be the last. The telematics industry is highly fragmented with many smaller players funded by venture capital. We expect to see additional consolidation among these players to scale their platforms and appeal to a wider base of customers,” she wrote.

Terms of the transaction have not been disclosed and it is expected to close in the second half of 2016. PJT Partners and Wells Fargo Securities, LLC acted as financial advisors and Debevoise & Plimpton acted as legal advisor to Verizon. Barclays and J.P. Morgan acted as financial advisors and Paul Hastings acted as legal advisor to Telogis.

Small Cells Will Follow, as Verizon Pushes Fiber into Boston

Analyst’s Angle

By Jennifer Fritzsche

Is it 2010 again? That was our first thought when we saw the announcement this past week that Verizon was expanding FiOS in Boston. Specifically, the carrier announced it would be “replacing its copper-based infrastructure with a state-of-the-art fiber-optic network platform across the city.”

The company will invest $300 million in the project in six years (remember Verizon is big customer of Dycom Industries, a fiber installation engineering company). Verizon is already technically IN Boston but in a very limited way (get ready Dorchester they are coming your way!).

Boston is an interesting city because in addition to being one of the donut holes of Verizon’s FiOS footprint (Baltimore is too), it has been a city they have talked a lot about when it comes to its wireless small cell push. I don’t think this is a coincidence. Fiber is KEY to its small cells and VZ is very serious there.

So while wireline is still important to them, no question. Math would dictate (remember wireline for Verizon is less than 10 percent of its combined operating income) many of these recent “wireline moves” by Verizon (think XO acquisition, FiOS push, etc) may be more related to wireless than anything.


EDITOR’S NOTE — Fritzsche is the senior analyst/managing director of Wells Fargo Securities. This is an excerpt from one of her Equity Research notes.

Tower Rents May See Pressure from Carriers

The Year Ahead

By J. Sharpe Smith

January 7, 2016 — Because of the new economics of providing wireless services, carriers no longer believe the current tower leasing model is sustainable, which may lead to a divergence from the traditional business model for renting space on towers, according to some in the industry.

“As the wireless industry continues to mature and carriers increasingly compete on price, revenue growth has slowed and profit margins have been squeezed. Carriers’ costs have increased due to the rapid growth in spectrum prices, tower rent escalators and tower rent increases related to the rollout of new technologies,” said Ronald Bizick II, CEO, Tarpon Towers.

As a result, carriers are looking to change the traditional tower leasing model in order to control their costs and align tower owners’ interests with their own.

“Carriers may be somewhat stuck with their current and legacy deals with both big and small tower companies, but I expect to see the carriers increasing downward pressure on rents and escalators on both new collocation and BTS leases,” Bizick said. “I think we are on the verge of the next great inflection point in the evolution of tower ownership and leasing.”

Wells Fargo Securities has done some research that has shown that AT&T is attempting to move some towers to secure lower rates.

“While we believe this is unlikely to happen, it seems to us that AT&T is showing a bit more ‘muscle’ with the tower companies these days,” Managing Director Jennifer Fritzsche wrote. “This begs the question: if AT&T begins to push back, will Verizon likely follow? A large portion of the tower companies’ recent growth has been driven by amendments. If the two largest wireless players begin to challenge these economics, it could impact the tower companies’ top-line growth rates.”

Alex Gellman, CEO, Vertical Bridge said the pressure on escalators from the carriers is only logical considering the economic environment. The tower industry needs to make adjustments accordingly.

“The more efficient the tower industry can be, lowering our costs, the better. That will allow us to help them address their costs,” he said. “Fundamentally, we are in the real estate business. If you have good locations, they will pay reasonable rent and stay a long time.”

The extent to whether the carriers can be successful in changing the tower leasing business model is not an issue in the short term. In the long run, however, the evolution of the tower leasing model could have a profound impact on tower companies, especially public companies.