Verizon CEO Defends C-Band Spending
Executives defended Verizon’s decision to go big in the C-band auction during an investor day presentation Wednesday. They pegged the total buy at $52.9 billion, including clearing costs. Verizon has been trying to add midband to counter T-Mobile, with its extensive 2.5 GHz holdings (see 2102250046). AT&T, the second-biggest bidder, has an analyst day Friday.
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“This was a highly successful auction for Verizon, a once-in-a-lifetime opportunity,” said CEO Hans Vestberg. There will be no comparable auction “in the foreseeable future,” he said. “Our disciplined strategy and strong balance sheet enabled us to be aggressive.” Verizon bought “the best spectrum available,” he said, giving the carrier “the strongest spectrum position.”
The company bought licenses in every available market and will increase its sub-6 GHz holdings by 120%, adding an average of 161 MHz in markets nationwide, executives said. The carrier plans to deploy the spectrum for 5G in 46 initial markets, covering 100 million by year-end, as long as it's cleared as expected, they said. Over 2022 and 2023, coverage is projected to increase to more than 175 million, with more than 250 million covered by 2024.
New Street’s Jonathan Chaplin told investors Thursday that the presentations did little to address concerns. “The C-Band auction went for more than double expectations,” the analyst said. “Investors were waiting to see if there were new revenue opportunities that would justify the much larger spend,” he said: “The news was disappointing. Even if the company hits the growth expectations enabled by the new spectrum, estimates for earnings and [free cash flow] are headed lower. In other words, there is no unanticipated payoff for the bigger-than-expected spend.”
“This is going to impact us as soon as 2021,” Vestberg said. “We acquired this C-band spectrum because it fits perfectly with our network … and accelerates our growth into 2022 and beyond.” Verizon plans to spend an additional $10 billion over the next three years to deploy the band “as quickly as possible,” he said: The telco has ordered the equipment and plans to deploy on 7,000-8,000 sites this year.
Chief Technology Officer Kyle Malady emphasized that Verizon made other spectrum buys for 5G, adding more than 500 MHz of high-band in the 37-39 GHz auction and up to 40 MHz in key markets through the citizens broadband radio service sale over the last year. CBRS is “ideally suited for our small-cell network and has a clear and imminent path to 5G,” he said. Verizon is building out fiber in more than 60 markets outside its traditional wireline footprint, he said. About one-third of Verizon 4G and 5G cellsites are served by fiber it owns today, with plans to increase that to more 50% over the next three years, he said.