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5 September 2019

T-Mobile, Sprint falling behind as regulators drag feet

Both Sprint and T-Mobile USA, whose proposed merger is still under regulatory review, are missing deadlines as they wait for clarity on their future position, allowing larger rivals AT&T and Verizon to forge ahead in terms of 5G scale and reach.

The need to rival or better the big two’s 5G spectrum position is one of the drivers behind TMO’s planned acquisition of Sprint from Softbank. While the ‘Uncarrier’ has the best position in coverage-friendly sub-GHz spectrum in the US, following its purchase of the largest chunk of 600 MHz airwaves in the broadcaster incentive auction, it is less well-placed to deploy significant capacity, necessary for the high bandwidth video and gaming services it is promising its consumers. One of the arguments for the merger with Sprint is that, together they can deliver a better network with better services, including fixed broadband and quad play, for US consumers, improving competition.

This is because TMO would be able to harness Sprint’s extensive 2.5 GHz spectrum holdings. In a market where 3.5 GHz – the main band being used internationally for early 5G capacity-driven roll-outs – is available only on a limited basis via the CBRS scheme, US MNOs are being driven up into the more challenging millimeter wave bands to deliver very high speeds to support services like home video. Sprint is the only major operator with significant chunks of mid-band spectrum, and its 2.5 GHz band, while originally used for 4G, has been designated for 5G also. If TMO can combine 2.5 GHz, 600 MHz, and its own early deployments in mmWave, it will have an ideal mixture of capacity and coverage support.

But TMO has asked contractors to put its 5G purchase orders on hold until 2020, according to reports in Wireless Estimator, because of continued delays in the approval of the Sprint deal. Some of the affected contractors anonymously told the wireless news site that the cancelled or frozen orders were worth millions of dollars – $700,000 for one company alone. One supplier said it had been told that work could continue if billing was delayed for 120 days.

The MNO itself told Mobile World Live: “We are managing capital expenditures as we do every year” and added that TMO was still planning to invest “billions to build out our network aggressively, expanding LTE coverage and performance while simultaneously laying the foundation for broad, nationwide 5G in 2020.”

T-Mobile’s capex in the first half of 2019 totaled $3.72 billion. In July, T-Mobile CFO Braxton Carter said on an earnings call the operator expects to close 2019 on the “very high end” of its capex guidance range of $5.8 billion to $6.1 billion for the full year.

Meanwhile, Sprint has been promising a powerful 5G network based on its 2.5 GHz spectrum, but it has had its own delays, which seem to be connected to teething troubles with the network and trouble getting site approvals, rather than the TMO deal.

There have been reports that Nokia’s equipment has taken longer than expected to be fully launch-ready, both for Sprint and Verizon. Nokia and Ericsson are supplying some markets with 5G equipment for all four national MNOs, while Samsung is also part of the AT&T, Verizon and Sprint roll-outs.

Sprint and Nokia reportedly missed their deadline to switch on 5G services in New York City, Los Angeles, Phoenix, and Washington DC, all of which were supposed to be live by the end of July, and all of which are Nokia-supplied markets. Sprint has launched 5G services in Atlanta, Dallas, Houston, Kansas City and Chicago but these are using equipment from Ericsson and Samsung, according to SDxCentral.

It was with a sense of relief, then, that Sprint at least switched on its biggest market, New York City, last week; and said it was in the final stages of testing with Nokia in the other large markets, where it expects commercial services to be ready in early September.

At the launch event near Times Square, Sprint CEO Michel Combes said it was worth “a few weeks” of delay to provide good 5G coverage. The operator’s CTO, John Saw, said: “It’s probably one of the largest 5G footprints in the world” (with 1.7 million people), and there is now Sprint coverage from Central Park to the southern tip of Manhattan.

The MNO is offering three 5G smartphones and a home hub – the 5G One Plus 7 Pro, Samsung S10+ 5G, and LG V50 ThinQ 5G smartphones, plus the HTC 5G Hub.

Dish has already issued a request for proposal (RFP) for its 5G network and has told the FCC that it will deploy a core network and offer 5G services to at least 20% of the US population by 2022.

There are still barriers to the merger being finalized however, despite approval from the Department of Justice, which handles antitrust issues, and FCC chair Ajit Pai recommending approval from the telecoms regulator. The most significant challenge is coming from a group of more than a dozen US states, and the trial to hear their case has now been postponed from October 7 to December 9, though some expect TMO to negotiate an out-of-court settlement before then.

This is also likely to delay auctions of C-Band spectrum and of CBRS Priority Access Licenses. New Street wrote, “Can the FCC feel comfortable deciding on certain issues, or whether there can really be any sales process with T-Mobile’s spectrum needs and the fate of 2.5 GHz band uncertain?” TMO has been lobbying for an FCC-led auction of the 3.7 GHz to 4.2 GHz C-Band spectrum, though this may be less important to it, if it gets Sprint’s 2.5 GHz airwaves.