A hot topic in the US telecommunications industry is convergence. Many believe it’s inevitable that wireless, fiber, and cable providers will become increasingly intertwined, first through bundled offerings and later through mergers and acquisitions.
During his company’s quarterly conference call on Wednesday, T-Mobile CEO Mike Sievert explained how he plans to address the situation.
“We are interested in convergence because we have a lot to offer,” he said.
But Sievert said T-Mobile doesn’t feel the need to buy a wired network to complement its wireless network as a way to protect its business.
“I’m personally not interested in some fundamental change in our strategy as a company,” he explained. He said T-Mobile’s goal is to be the best wireless provider and that wireless “is where the future is.”
Instead, he suggested that T-Mobile could look to some kind of wireline partner, suggesting that the kind of corporate pairing he would like would be a strategic investment that would not go on T-Mobile’s balance sheet.
“If we were to get involved, we would probably do it with partners,” he said. “It would be wise to do it with partners.
Ultimately, Sievert said T-Mobile will only pursue convergence if it benefits customers. He argued that offering cheaper services through convergence is not necessarily a winning strategy. “So far, we haven’t seen the benefits of convergence actually translate into value for consumers, rather than just a discount. There are many ways to provide discounts to customers,” he said.
“We would be interested if it was something where we could add value, improve the market for customers and make money,” he said.
Sievert’s comments, presented in conjunction with T-Mobile’s 2022 fourth quarter results and 2023 perspective, are important given that many analysts see T-Mobile as a key player in potential telecom network consolidation.
Evaluation of the match
“The wireless carrier should buy Charter,” financial analysts at LightShed Partners wrote in their 2023 report. on the list for investors to watch. And if that doesn’t happen, they predict wireless carriers will pursue other deals. “In the absence of a massive deal, we expect wireless carriers to enter the market in smaller volumes.”
LightShed analysts aren’t the only ones bracing for some sort of telecom convergence in the US.
“Verizon, AT&T and Charter have argued that consumers want wireless and fixed broadband from the same provider,” financial analysts at New Street Research wrote in a recent note to investors. “There is a strong argument that operators offering both will have a competitive advantage because they can offer better value or a better product (the better product has yet to be proven; the better value is today).
Importantly, analysts argued that cable operators such as Charter are in a very strong position in convergence because they can offer mobile services to all of their cable customers, while wireless operators can only offer fixed wireless Internet offerings to a relatively small number of their customers. for a subset of customers. smartphone customer base. In addition, analysts said cable operators are able to offer mobile services at extremely low prices, thanks in part to their network offloading strategies.
As a result, “all four national wireless carriers [AT&T, T-Mobile, Verizon and Dish Network] will be looking to acquire terrestrial broadband assets. Each market has two – an existing ILEC [incumbent local exchange carrier] and cable. Investors will want to hold long assets over mobile assets in this environment,” they wrote.
New Street analysts added that they expect fiber companies such as Lumen Technologies and Frontier Communications to begin adding wireless services to their home broadband offerings to take advantage of any potential market consolidation.
“But there’s a bigger opportunity, which is that as we continue to bring to market the value and benefits of a converged product that’s really in our footprint, we’re the only supplier that can make those claims and have a better product.” and have what we call wireless wireless,” Charter’s new CEO Christopher Winfrey said during his company’s recent quarterly conference call, according to a transcript from Seeking Alpha.
T-Mobile Earnings and Tips
In addition to the convergence remarks, T-Mobile Sievert also discussed his company’s quarterly results and 2023 outlook. perspectives. The operator has already released most of its fourth-quarter results.
As Reuters noted, most of T-Mobile’s revenue in the fourth quarter was chewed up by aggressive promotions from Verizon and AT&T.
However, T-Mobile said it was able to meet all of its financial targets for 2021. analyst’s day. This is noteworthy because Verizon did not.
T-Mobile also laid out its expectations for 2023. The company said it expects to receive $5 million to $5.5 million a year. deferred net customer accruals as well as core adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from $28.7 billion. and 29.2 billion
Analysts have generally maintained that the outlook is relatively conservative, though they noted that T-Mobile regularly sets modest targets only to exceed them later this year.
However, it is widely expected that in 2023 With growth in the U.S. wireless industry expected to slow, New Street analysts warned that T-Mobile may have to fight harder for new customers this year. For example, if Verizon decides in 2023 to be more aggressive in the market, “costs are likely to increase for everyone.”
Finally, T-Mobile executives once again boasted about the carrier’s 5G network, specifically its operations over the 2.5 GHz mid-range spectrum. That spectrum, acquired through T-Mobile’s acquisition of Sprint, primarily fueled the company’s network speed and bandwidth improvements.
Neville Ray, T-Mobile’s head of networks, said the carrier expects to continue expanding its network in 2023. Specifically, he said the company currently covers 265 million people with its mid-band 5G network. people, and by 2023 in 2023 He said neither Verizon nor AT&T said when (or if) it might also cover the $300 million. people on their medium band network.
In terms of usage, T-Mobile officials revealed that customers on the carrier’s Magenta Max smartphone plan use an average of 40GB per month.
“The facts show that T-Mobile is the new network leader,” Sievert said, nodding to several recent studies showing that T-Mobile’s 5G network is ahead of the competition.
But Verizon also cited a RootMetrics study on Wednesday that showed its network was “a leader in performance, availability and reliability in most 125 metro markets.”
— Mike Dano, editorial director of 5G and mobile strategies, Light Reading | @mikeddano