Talley Inc

UScellular sees bright side to spectrum scarcity Given the slowdown in spending on the part of big wireless carriers as the 5G era shi s into low gear, why does UScellular think it can make a viable business selling space on its towers? A er all, a booming tower business implies carriers will spend more on their networks, not less. UScellular itself has reduced its 2024 guidance on capital expenditures to a range of $550 million-$600 million versus the previous $550 million to $650 million as it transi ons from a 5G coverage phase to one more focused on speed and capacity. But running a wireless business at the same me it's running a tower business gives UScellular an advantage as it seeks to become a tower company, according to President and CEO Laurent Therivel. "You kind of get visibility into exactly what's driving trends and for us, what's driving the trends is we've completed our coverage," he said during the company's Q3 earnings call on Friday. "Most of our improvements are going into capacity." The next big round of investments will be triggered by one of two things. The first will associated with spectrum for 6G and densifica on to support the 6G build. The second will be driven – interes ngly enough – by a paucity of spectrum, he said. "There's not really a roadmap for carriers to get access to new spectrum any me in the near future, absent, of course, some spectrum that we're marke ng," he said. "We're kind of bullish on that part." Currently, the FCC has no auc on authority and there's no spectrum being queued up for auc on. There was specula on that Dish Network, now under parent EchoStar, might be in the market to sell some of its spectrum, but given recent announcements about its financing and the buildout extension it received from the FCC, it doesn't look like that spectrum is going to be on the market any me soon. Spectrum scarcity Without access to new spectrum, carriers will be densifying their networks to meet the projected 20%-25% annual demand for data that consumers use. That will lead to more small cells and the need to access more towers in places they previously didn't cover, according to Therivel. Most of UScellular's towers are in more rural areas. Therivel also alluded to the historically conten ous nature of wireless carriers doing business with the tower companies. "I've been in the business for a long me, and there is usually a bit of a conten ous rela onship between tower providers and carriers, and we've worked hard to ensure that that is not the case. We have good agreements in place," he said, whether they're with T-Mobile, Verizon or AT&T. Basically, when UScellular closes its $4.4 billion deal with T-Mobile, which is expected in mid-2025, UScellular wants to be in a posi on where "that tower business can completely stand on its own," he said. "That's going to require some work in the next six, nine months between now and close, and that's where another por on of our opera onal focus will be." UScellular is selling all of its wireless opera ons, including fixed wireless, to T-Mobile, as well as about 30% of its spectrum. Separately, UScellular struck a deal to sell a chunk of spectrum to Verizon and two smaller operators for $1 billion. It s ll is trying to find buyers for the remainder of its spectrum. That leaves it with the tower business. UScellular owns 4,388 towers, and it plans to add more tenants to the structures, which currently have a tenancy rate of 1.55. Subject to regulatory approvals on their deal, T-Mobile has commi ed to be on at least 2,015 of the towers for an ini al term of 15 years. AI to the rescue – sort of As for the impact of ar ficial intelligence (AI) on its smartphone business, Therivel said the jury's s ll out as to what will drive consumers' purchasing decisions. Like other carriers, UScellular is seeing a decline in the rate at which customers are upgrading their handsets. So far, there hasn't been any "supercycle" driven by Apple's latest iPhone and the AI capabili es that are star ng to roll out. "I just think it's too early to tell, but we certainly have not seen a supercycle to date," he said. Where UScellular is seeing an impact from AI is on the cost side of its opera ons. There's a lot of promise from AI in providing a be er customer experience in care centers. "Not necessarily replacing humans, but providing them with be er prompts," like "next best offer" or "here's what we suggest," he said. It's taking a lot less me to train customer care reps because of AI capabili es, and he expects a similar level of efficiency to translate into its retail stores. "From a cost perspec ve, I do think we're already seeing a fair amount of benefit," he said. Ar cle Credit: h ps://www.fierce-network.com/wireless/ uscellular-sees-bright-side-spectrum-scarcity Talleycom.com SHEET QUARTER 4 2024

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