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As the saying goes, you can never be too rich or too skinny. And if you’re a wireless carrier, apparently, you can never have too much wireless spectrum.
At least that’s AT&T’s take. The company, which is the second largest wireless provider in the U.S., is in good shape when it comes to wireless spectrum for the next five years, according to chief financial officer John Stephens. But the company is still pushing the Federal Communications Commission to free up as much additional spectrum as possible.
“We have a satisfactory spectrum position for the next five years,” Stephens said during a presentation at a Morgan Stanley investor conference in San Francisco on Tuesday. “At the same time, we continue to encourage the government to make more spectrum available. And the reason is that it takes a long time to get spectrum to market. It’s a constant process.”
In 2011, AT&T claimed it was in desperate need of more spectrum in order to compete aggressively with rival Verizon Wireless. But at the end of the year regulators put the kibosh on its $39 billion plan to buy No. 4 wireless carrier T-Mobile USA in a deal that AT&T said was necessary to net it the much-needed spectrum.
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A year later, Stephens said the company is in much better shape, thanks to some 50 “tuck-in” deals or smaller spectrum acquisitions that have helped the company close gaps in specific spectrum bands and regions of the country.
Stephens said the company is satisfied with how quickly the FCC has approved these deals. And he is confident that deals the agency is currently reviewing will also be approved in a timely fashion.
AT&T has recently proposed buying 39 spectrum licenses from Verizon in the lower 700MHz B block in a deal worth $1.9 billion. And the company has also proposed spending $780 million on buying assets from U.S retail operations of Atlantic Tele-Network.
But the most significant spectrum deal for AT&T over the past year has been a compromise the company forged with Sirius XM Radio to mitigate interference issues in the 2.3 GHz Wireless Communications Service, or WCS band. This compromise, which was approved by the FCC in October, allows AT&T to use about 30 MHz of spectrum that previously had been unusable due to potential interference problems.
“If you put all those together, we’re in a much better now than we were at the end of 2011,” he said.
But AT&T is not slowing down its lobbying efforts when it comes to pushing the FCC to auction more spectrum. The company has supported the FCC’s efforts to free up more spectrum by asking TV broadcasters to give up spectrum that can be auctioned next year in the FCC’s first incentive auction. And it is already starting to weigh in on the rules for the auction. One of the company’s chief concerns is making sure that any wireless provider can participate in the auction, regardless of how much spectrum they already own.
In a filing to the FCC last month, AT&T said that the “commission should reject any proposal to restrict the participation of particular carriers in these auctions on the basis of their existing spectrum holdings.”;p>
This position makes sense given AT&T’s increasingly strong spectrum position. Stephens did not address specifics of AT&T’s spectrum policy, but did go on to talk about how this improved position is also helping the company grow revenue and improve service for its customers.
More spectrum drives data growth, which drives revenue
Stephens said a key to AT&T’s success in terms of increasing revenue and keeping profit margins high is the fact that the company is converting more customers to smartphones and data plans. In addition, customers with data plans are opting for higher capacity plans, further driving revenue.
Josh Miller
“Surprisingly more than 25 percent of customers are taking the 10 gigabyte or higher data plans,” he said.”There is a tendency to buy up in buckets of capacity. We saw this with our smartphone customers when we first introduced tiered pricing, where 75 percent of them bought higher buckets. We believe we have the balance right.”
The added capacity is certainly helping the carrier fuel this growth and it will continue to help AT&T as it expects more customers to add devices to their services plans, including tablets. AT&T is also embarking on new services, such as home security and monitoring and also providing 4G LTE service to the automotive industry. On Monday, the company announced a major deal with General Motors to supply its upcoming connected-cars with 4G LTE service.
Stephens said this will enhance services for the front of the car, but also offer new opportunities for AT&T to make money by also connecting passengers to other connected devices in the backseat of the car.
AT&T is also continuing to invest in wireless. The company has said it its capital spending plan totals $21 billion in 2013. Stephens said that about 60 percent of that will be spent on on wireless. Specifically, AT&T will add capacity into the existing network and further develop its LTE coverage.
Stephens added that the company has already seen great improvement in its network performance, especially in cities, such as San Francisco. This is a big deal for AT&T given that the company’s network suffered under the pressure of the iPhone when it first launched. Dense urban markets, such as San Francisco and New York City, were problematic for AT&T as they tended to see the highest concentration of iPhone and other smartphone users. But Stephens said that the company has a handle on these issues and as it continues to build out the 4G LTE network, it’s alleviated many of these issues.
AT&T currently covers about 170 million potential customers with LTE. And he said that the company is on track to meet its goal of covering 250 million potential customers by the end of the year.
