T-Mobile is scaling back on its 5G buildup ahead of the Sprint merger — and it could potentially reduce revenues for tower companies (TMUS, S)

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T-Mobile is scaling back on its 5G buildup ahead of the Sprint merger — and it could potentially reduce revenues for tower companies (TMUS, S)

As US network operator T-Mobile waits for a resolution to its pending $26 billion merger with fellow telecom Sprint, it’s slowing down plans to build out infrastructure for its 5G network, according to a report from Wells Fargo via Light Reading.

Big Four Will SPend Big Again To Deploy 5G Networks


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The report claims that T-Mobile is holding off on new sites for macrocells as it awaits regulatory and court approval for a merger that will transform the US wireless market and drastically change T-Mobile’s standing in terms of assets and finances. 

This summer, there were reports of T-Mobile scaling back its orders to wireless network construction contractors and of new network equipment due to merger delays. The proposed merger between T-Mobile and Sprint was first announced in April 2018 and expected to close in the first half of 2019.

T-Mobile’s spending plans and purchase orders for 2019 were likely made according to this timeline. But with no set date for resolution thanks to factors such as a lawsuit from 18 US state attorneys general, it’s likely the telecom adopted a more conservative spending stance. The Wells Fargo report states the slowdown in investment is extending beyond contractors and to T-Mobile’s business with cell tower firms including American Tower, SBA Communications, and Crown Castle.

T-Mobile’s delays in 5G buildup will push back the timeline of its own 5G rollout to customers in the consumer and enterprise spaces. The slower 5G rollout will save T-Mobile capital in the near term, but it will also mean that the telecom won’t be able to deliver customers the faster data speeds and lower latency in as many areas as competitors will. And its next steps in 5G deployment won’t be to reinforce and expand on that network — which would be a simpler process, as it would have real-world data on signal strength and usage patterns to rely upon — but to build it out for the first time.

A slowdown in tower buildup would also impact the supply chain, and send ripple effects across T-Mobile’s competitors as a result. If T-Mobile isn’t buying cell towers, that will mean less revenue coming into cell tower firms, which are key partners for every network operator. This problem would be amplified by Verizon, per the Wells Fargo report, as the telecom concentrates on building up its fiber optic backbone for all its lines of business and waiting for standardized 5G equipment, while possibly waiting to acquire C-band spectrum at auction next year.

With just AT&T to provide a consistent source of purchases and revenue, tower companies might be crunched for cash and forced to scale back on cost-saving research and new product development. That would lead to higher 5G costs throughout the US mobile ecosystem, potentially pushing total capital expenditure from the Big Four telecoms beyond the $47 billion at which Business Insider Intelligence expects it to peak in 2022.

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