AT&T’s Build-Out, Strike’s Out with new cell sites.Posted July 17, 2014 by admin
Whether it is AT&T wireless, T-Mobile, Sprint or Verizon Wireless claiming to have the fastest 4G speeds, one thing remain’s the same. They are all trying to “keep up with the Jones’s” when it comes to wireless speeds. The reality is that depending on the area you are located in, they can all make that claim. The one thing that remains the same in all of this is the need for more cell site locations and upgraded equipment.
It’s estimated that 35%-40% of the current cell site locations in the U.S. have upgrades or additional equipment applications pending. That is roughly about 150,000 applications! This is why American Tower, SBA Communications and Crown Castle International stock prices are through the roof right now.
All of these upgrades cost real capital and a serious financial investment from the carriers. This is where AT&T wireless has recently run into problems. In order to get a grip on cost, the have effectively brought their build outs and upgrades to a crawl.
Here is my opinion on why:
- The purchase of Direct TV for $48.5B (yes, B as in Billion is a lot of cheddar) – I had an investor ask why AT&T would do this deal. This is simple; they want content and to be able to deliver that contact “on the go”. They would love for you be watching NFL Sunday Ticket on your iPhone, Andriod or tablet on a Sunday afternoon. That means data, data, data and more data charges. In order to deliver that data, they need to get faster and have more cell site capacity. Remember, it is all about bandwidth when it comes to video.
They need more capacity in highly populated areas. When it comes to cell site leasing rates, the urban and high density area’s usually get higher monthly rent than rural cell site location. This has become a real issue for AT&T since it had “cost averaged” the cell site locations it was building. Now, with the focus on densification of the urban cell sites it has almost tripled the cost of the “average” cell site.
- Historically the cell site lease rent could be as much as 3x – 4x higher in the highly populated areas versus low populated areas.
- These cell sites usually require more equipment and fiber connections.
- Newer equipment is heavier than the 3G equipment which adds to the “tower load” capacity.
- Tower Companies charge a lot more money for this type of equipment.
All of the above has led to AT&T wireless spending almost $6B in Q1 in capital expenditures. That was enough for someone to say, “time out and let’s get a grip on this”. Instead of the $150,000 on a cell site, the real cost for AT&T’s needs could be north of $400,000. Take that $250K difference and multiple it over thousands of cell sites.
This could mean more revenue opportunities on new and existing cell site locations and cell site leases.
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