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Wireless CapEx Alert – Verizon Wireless Full-Speed Ahead!

By John Celentano —

July 29, 2015 — Apparently, Verizon Wireless (VZW) did not get the memo about a slowdown in capital expenditures (capex), reporting a big increase in the second quarter 2015.

During its 2Q earnings call on July 21, VZW reported 2Q15 capital expenditures of $3.1 billion, a jump of 29 percent quarter-to-quarter (QtQ) compared with the $2.4 billion spent in 1Q15, and up 13 percent year-over-year compared to $2.8 billion in 2Q14. Verizon reiterated its guidance for total 2015 capital spending at $17.5 billion to $ 18 billion, as well.

Through 1H15, combined wireline and wireless capex tallied $7.8 billion or 44 percent of guidance. Of that total, wireless capex accounted for 71 percent with wireline making up 29 percent of the balance. Assuming the wireless/wireline split holds through year-end, Verizon’s projected 2015 investments in its wireless network are about $12.5 billion.

VZW’s second quarter wireless capex accounted for 25 percent of the full-year budget compared to 19 percent in the first quarter. Wireless capex through the first half of 2015 tallied $5.5 billion. That’s just 44 percent of the full-year guidance. This means that wireless capital spending has a lot of upside and will continue to ramp through year-end.

Even with the usual summer slowdown, we expect capex in the third quarter to increase about 2 percent to $3.2 billion or 26 percent of the budget. Watch for wireless network investments to finish with a flurry through the fourth quarter, spiking to $3.8 billion or 30 percent of the full-year budget.

Capital efficiency (CE), that is, capex-to-service revenues, was 18 percent in second quarter compared to 16 percent in the first quarter, even as second quarter wireless service revenues slipped 1 percent QtQ.

CEs of 15 percent to 20 percent and above indicate that the company is an expansion mode and is investing in its network ahead of anticipated demand. By contrast, CEs in the 10 percent to 15 percent or below indicate that the carrier is operating in a maintenance mode.

Staying on the high-end of the CE range, VZW is charging ahead with a robust network densification program that includes macrocell additions, small cell rollouts, and in-building distributed antenna systems (DAS).

Of the total wireless capex, about 70 percent to 80 percent is going into the radio access network (RAN) for site development, equipment and installation. The balance is going into core switching, network operations and backhaul facilities. The lion’s share of RAN investment involves new and existing macrocells. DAS deployments are still significant but are slowing.

VZW is going big on small cells and has already indicated that small cells could account for up to $500 million of its 2015 capex. Given the level of wireless network investment to date, we think that figure may be low. Small cell capex could account for about 5 percent to 6 percent, roughly $600 million to $750 million, of VZW’s total 2015 wireless network investment.

Stay tuned. It’s going to be a fun run!


John Celentano is the president of Skyline Marketing Group.

Verizon’s Heart (and 400 Small Cells) to Be Left in San Francisco

By J. Sharpe Smith —

J. Sharpe Smith


April 7, 2015 — Targeting 400 locations for a small cell build out in the heart of San Francisco, arguably the most picturesque and picky U.S. city, is no mean feat. But Verizon Wireless is taking it on.

In the past year, the carrier has worked with the City of San Francisco and its agencies to get the lease agreements in place to attach small cells to street lights and municipal poles. It’s currently in the engineering phase of the project and will soon issue public notices about the small cell sites and go through public hearing processes for 60 locations. The carrier’s target is to get a majority of the 400 small cells in the system deployed in 2015.

Municipal Relationship Critical to Rollout

Verizon signed two master lease agreements with the San Francisco Public Utilities Commission and the San Francisco Municipal Transportation Agency. The carrier is also a member of the Northern California Joint Pole Association, whose members — municipalities, electric utilities, telephone companies, wireless companies and DAS providers — have or desire to hold joint equity in utility poles.

“We worked closely with the planning department to get a design that was feasible for the city. We feel very good about the design fairly early in the process,” Jake Hamilton, Verizon director of networks, northern California/ Nevada, told AGL Small Cell Link in an exclusive interview.

Verizon partnered with ExteNet Systems, which did the site acquisition and permitting on 70 percent of the locations. ExteNet, known mostly for DAS, will also perform the deployment on those sites that are in its name as well as the fiber optics for the system. A local site acquisition/architectural engineering firm, Modus, deployed the small cells for Verizon Wireless.

“It was a learning process for us. We accessed some of the historical DAS providers as well as doing some of them ourselves,” Hamilton said. “Small cells are not as cheap and quick as we thought they would be. Without the underlying agreements with the city, you really can’t go anywhere. It is critical that you have good partnerships with the city and its agencies.”

Verizon Wireless is deploying 5-watt Ericsson LTE radios every two to three blocks, which will provide service anywhere from 500 feet to 1,000 feet. Coverage will include the northeast quadrant of the city, including the SOMA (South of Market Street), Financial District, North Beach and Russian Hill.

“There are restrictions from the city on how much equipment we can place on the poles, which are small in diameter, so they are sensitive to how much equipment is deployed. The 4G micro RRU from Ericsson really gives us the opportunity to go small,” Hamilton said.

Cloud RAN Employed to Backhaul Small Cells

To backhaul the small cells, Verizon Wireless will employ a cloud radio access network (RAN) architecture using dark fiber. On the pole, there will only be two radios, micro RRUs, which will be transported to a hub location via CPRI fronthaul. The brains of the system, the baseband units, will be located in the hubs.

“With CPRI [Common Public Radio Interface], you can minimize the equipment at the small cell site,” Hamilton said. “You don’t need the optical routers that are typically installed at a cell site, which has EBH [Ethernet backhaul].”

The San Francisco small cell system is the first significant small cell deployment for Verizon using the cloud radio access network (C-RAN) architecture.

“C-RAN is a fairly new concept for the industry. It paves the wave for features coming in the future that will allow interference cancellation and other signaling benefits,” Hamilton said. “I think C-RAN is the direction of the industry, especially when it comes to transport and how you can make the most of a single strand of fiber.”

The San Francisco small cell system will handle everyday communication needs as well as provide the cornerstone for Verizon’s expanded capacity to handle the flood of data-hungry visitors who will make the pilgrimage to the city for Super Bowl 50 to be hosted at Levi’s Stadium in nearby Santa Clara, California.

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VZW Capex Levels Flat in the 3Q, Up for the Year

J. Sharpe Smith

October 28, 2014 — In the third quarter, wireless capex at Verizon Communications was $2.5 billion, even with last year’s third quarter, and through the first nine months of 2014 it totaled $7.8 billion, compared with $6.7 billion in 2013.

“Our deployment of capital in wireless has been very consistent throughout the first three quarters of this year,” said Fran Shammo, Verizon chief financial officer. “This year we had a much more flatness to our capex spending. So if you looked at prior year we always had more of a ramp into the back half of the year. You won’t see that this year; so it has become more level.”

Verizon has been deploying AWS spectrum across its footprint and currently has more than 400 markets with AWS, or XLTE, as it is branded.
“We are deploying capital to proactively stay ahead of demand, and our capital investments continue to focus on adding capacity to optimize our 4G LTE network, primarily by increasing network density and deploying spectrum,” Shammo said.

Along with the deployment of spectrum, Verizon is counting on investments in small cells, distributed antenna systems and in-building solutions allow it to build upon its current network.

“Our investment strategy is focused on adding capacity to our network to meet increasing demand, which is driven by 4G device adoption and higher customer usage,” Shammo said. “Growth in wireless revenue and profitability continues to be driven by our high-quality retail postpaid customer base, where we continue to see very strong 4G device adoption.”

In the next year, Verizon will focus on improving its capex-to-revenue ratio on a year-over-year basis.


J. Sharpe Smith is the editor of AGL Link and Small Cell Link.

Big Tower Deals Won’t Swamp Smaller Portfolio M&A

By J. Sharpe Smith —

October 16, 2014 — The M&A market picked up in the third quarter with the two major announcements of tower sales by carriers. But while the press likes to hype the blockbuster billion-dollar deals, the market for smaller portfolios will remain robust, Jason Nicolay, vice president, Media Venture Partners told AGL Link.

Verizon Wireless, has hired TAP Advisors to explore the sale of its towers, estimated at 12,000 in number, and U.S. Cellular is selling 595 non-strategic cell towers outside of its core markets.

Potential buyers are now evaluating Verizon’s towers on an individual and portfolio basis and the carrier hopes to have a deal done by the end of the year, according to Nicolay.

“If Verizon is the only tenant on a particular site, buyers will be looking at whether the sites are good collocation prospects for the other carriers to increase the cash flow on a per-site basis,” he said.

Verizon’s tower sale will not adversely impact the sale of smaller portfolios, according to Nicolay, because not that many tower companies will be capable of buying such a large portfolio.

“A lot of tower buyers will still be interested in buying one to 10 sites or more from middle market developers,” he said. “There is very little inventory of cell towers and a lot of demand right now.”

With two major tower portfolios on the market, the large tower aggregators will be busy doing their due diligence, perhaps opening up opportunities for smaller buyers.

“Verizon’s proposed transaction will take a lot of time from the bigger, likely buyers to analyze how it might affect them operationally and financially. That gives an opportunity for some smaller tower buyers to acquire assets in cases where it might have not have been possible,” Nicolay said. “That said, the market is so hungry for assets that smaller buyers are still paying prices that are attractive to sellers.”

While Verizon is the last major carrier to sell its tower assets, there are plenty of other smaller carriers with tower portfolios.

“Every deal doesn’t have to be 12,000 towers or even 1,000,” Nicolay said. “The tower market is still highly fragmented, and there are still a lot dollars chasing space. There are going to be buyers out there in the market.”

T-Mo, VZW Evolve LTE Networks

By J. Sharpe Smith —

October 2, 2014 — Mobile carriers are continuing to make strides to evolve their LTE networks to provide increased capacity through carrier aggregation, improved voice quality through voice over LTE and connectivity with Wi-Fi networks.

T-Mobile selected Ericsson to provide equipment and services for the expansion of its nationwide 4G LTE network, improvement of in-building, highway and rural performance, and expansion of VoLTE services.

The contract is an extension of T-Mobile’s 2012 build out, which featured Ericsson’s RBS 6000 base station equipment, installed 700 MHz, 1900 MHz and 1700/2100 MHz bands.

T-Mobile is the first U.S. wireless carrier to deploy enhanced Single Radio Voice Call Continuity (eSRVCC) technology, which enables a seamless handover of VoLTE calls from LTE to existing 2G or 3G networks. As voice remains a critical service for LTE networks, Ericsson has delivered its Session Border Gateway and Ericsson Media Resource System to support voice handovers using eSRVCC.

Nokia Networks is also providing LTE-Advanced equipment and services to T-Mobile in the 700 MHz and 1900 MHz bands for expanded availability of VoLTE and Wi-Fi seamless call/text mobility. The LTE equipment includes the Flexi Multiradio10 Base Station platform for 700MHz radio sites and the LTE/GSM RF sharing solution for 1900 MHz sites. As part of the agreement, Nokia Networks is providing LTE-Advanced carrier aggregation for all T-Mobile spectrum bands.

Customers will be able to use any public or private Wi-Fi connection for calling and texting. This new technology is designed to deliver seamless voice coverage between T-Mobile’s VoLTE network and Wi-Fi with compatible smartphones.

VZW Doubles Spectrum Access in 80 percent of its Markets

Verizon Wireless has launched XLTE in 22 new markets, bringing the total to more than 400 markets or four out of five Verizon Wireless 4G LTE markets.

XLTE, Verizon’s brand for LTE Advanced technology, doubles the amount of spectrum available through the use of carrier aggregation, which accesses both 700 MHz spectrum and the AWS spectrum . Customers with 4G LTE devices operating solely on the 700 MHz spectrum in XLTE markets also benefit from the extra capacity created by XLTE Ready device traffic moving to the AWS spectrum.

New XLTE markets span from Ocala, Florida, to Sedalia, Missouri, and Lihue, Hawaii.