Aggressive spending plans laid out by T-Mobile US and Sprint in a merger announcement could prove to be a boon for network equipment providers, at least in the short term.
The companies said they would invest $40 billion on an integrated network and business in the three years following the merger, a figure several billion dollars higher than the total investments T-Mobile and Sprint announced previously.
Recon Analytics founder Roger Entner told Mobile World Live the spending plans will likely translate into gains for equipment providers including Nokia, Ericsson, Cisco and Samsung. He added the equipment providers might end up with slightly lower margins if the combined entity seeks a discount for bulk orders, but said “overall, it should be very positive for them”.
Anshel Sag, associate analyst at Moor Insights and Strategy, agreed the spending boost will likely be a net positive for equipment providers in the short term as the combined entity pushes hard for 5G. However, he warned the elimination of a fourth player in the market could be a negative in the long term.
“I would say that consolidation usually means less total spending and I think that will ultimately be the case down the road.”
Jason Leigh, a senior research analyst for mobility at IDC, also offered words of caution. He said calculating the impact of the combined company’s 5G network plans is “tricky as it depends on whether the radio will support both 600MHz and 2.5GHz spectrum transmissions: one radio or two”. Leigh added T-Mobile and Sprint’s ability to secure significant amounts of mmWave spectrum in an auction in November could also tip the scales.
The picture looks similarly mixed for tower companies.
Speaking during a press call, T-Mobile CTO Neville Ray noted the new entity intends to decommission around 35,000 of T-Mobile and Sprint’s combined 110,000 macro sites. Though it plans to add 10,000 new sites to fill in coverage gaps, this leaves the network with 85,000 macro sites at the end of a planned three-year integration.
Entner pointed out this could put a dent in tower companies’ growth expectations. However, he said those which have expanded their portfolio to include small cells should be able to smooth out the dip, as the new operator plans to increase its small cell holdings from fewer than 10,000 sites to around 50,000.