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Straight Talk Service Provider


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To move 5G from concept to reality, service providers are working feverishly to upgrade their networks. At the Deutsche Bank Media, Internet & Telecom Conference held in early March, AT&T senior EVP and CFO John Stephens highlighted the company’s plan to expand its 5G coverage from about 80 million PoPs to 200 million by mid-2020. At a similar event sponsored by Morgan Stanley, Verizon EVP and CFO Matt Ellis noted that the provider plans to double 5G coverage in 2020, from 31 markets to more than 60. These are ambitious goals that will require substantial capital investment. Providers in other parts of the world are undertaking similar initiatives to upgrade and expand networks to support 5G. The scale and cost of the expansion is pushing providers to consider alternative infrastructure ownership models.

Monetizing network assets through sale, sale-leaseback, and spinoff transactions have been popular with providers for gaining funds to pay down debt or support future investments. In the US, AT&T and Verizon have undertaken a series of tower transactions in recent years. These transactions shift the ownership of the towers to a sale and leaseback model where the providers lease the rights to the towers to a third-party infrastructure company such as American Tower or Crown Castle, and sublease capacity on the towers at a set rate for a set term. The infrastructure companies can also lease access to other tenants.

These transactions move existing assets to a shared infrastructure, but when it comes to new tower builds, AT&T and Verizon are looking to other suppliers. AT&T representatives have said the company is looking for alternative infrastructure providers in a bid to reduce the rental costs of new infrastructure. AT&T and Verizon in 2017 announced a joint venture with Tillman Infrastructure to build towers. The following year AT&T signed an agreement with CitySwitch under which CitySwitch will construct towers to support AT&T’s 5G initiatives. AT&T’s 2019 tower sale to Peppertree Capital leaves AT&T as the sole tenant for these towers, with Peppertree taking on the management and operation of the facilities.

Outside the US, providers are selling assets to create independent tower companies that will offer retail and wholesale services or establishing joint ventures. Vodafone and Telecom Italia sold their tower infrastructures to create Inwit, a combined standalone company, with each provider holding a 37.5% stake. To comply with EC regulations, Inwit must support wholesale access to 4,000 towers in cities with more than 35,000 people. In 2019, Fastweb partnered with Wind Tre to accelerate the rollout of a shared 5G radio access and backhaul network across Italy. Under the agreement, the companies will operate independently, but Wind Tre will manage the network. Wind Tre will also provide Fastweb with roaming services on its mobile network and will have wholesale access to Fastweb’s FTTx network. In Germany, a recent 5G spectrum auction award to Deutsche Telekom, Telefónica Deutschland, and Vodafone Germany made wireless coverage to rural areas a condition of the spectrum award. The providers will jointly build radio masts and share the task of running them and will have equal access to all locations for antenna deployment.

The need to manage the costs of network upgrade and expansion to support 5G is leading carriers to consider a range of infrastructure strategies. The approaches providers take will vary according to the strategy taken and regulatory requirements.

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