More moves possible, including sale of tower, spectrum assets
Regional telecom operator Ntelos this morning announced plans to exit some of its “eastern” markets, including the sale of spectrum to T-Mobile US in a move to re-focus its efforts in its current “western” coverage areas.
The carrier said it plans to sell 1.9 GHz spectrum licenses covering around 55 million potential customers in Richmond, Hampton Road and Norfolk, Va., to T-Mobile US for $56 million in cash and begin exiting those markets. The deal is expected to close in April, with Ntelos then leasing back some of that spectrum to support continuing operations through Nov. 15, 2015, at which point it expects to have completely turned down services in those markets. That decommissioning of services will include the closing of retail operations and transfer of approximately 180,000 current subscribers in those markets to “another carrier.”
In addition to the spectrum sale, Ntelos said it was looking at other potential asset moves, including the sale of tower assets and undeployed spectrum. Ntelos’ current CDMA and LTE offerings tap into its 1.9 GHz spectrum holdings, though the carrier also controls 20 megahertz of 1.7/2.1 GHz spectrum in some markets. Similar spectrum is currently garnering record bids in the Federal Communication Commission’s ongoing Auction 97 proceedings.
Ntelos said the moves to leave its eastern Virginia markets will see it focus efforts on its markets in western Virginia and West Virginia, where it claims to have better competitive footing. The western markets will receive a stronger focus of the carrier’s capital expenditures in terms of continued build out of LTE services. The western markets currently generate all of the revenue tied to Ntelos’ recently modified network agreement with Sprint.
“In an effort to strengthen our retail sales performance and leverage our strategic relationship with Sprint, we are rightsizing our business and redirecting our resources on our western markets, which provide us the greatest opportunity for sustained, profitable growth,” explained Ntelos Chairman Michael Huber. “At the same time, we are exiting markets that have become increasingly competitive and where we have been unable to achieve acceptable financial returns. Focusing on our western markets, where we benefit from a strong branded retail presence and access to multiband spectrum in the (Sprint agreement) territory, will allow us to make additional investments to improve the experience of our customers. We believe these investments will enable us to increase our market share, ultimately leading to greater operating efficiency and profitability. The initiatives we announced today improve the strategic coherence of our business as well as enhance our ability to seek opportunities to leverage our strategic assets as we build out our LTE network.”
Ntelos did not spell out specific savings expected from the move, but did say the move could cost it $55 million and expects to book $30 million in impairment charges for the current quarter. Ntelos’ stock (NTLS) was trading down more than 9% early Tuesday.
The company has seen its competitive position threatened over the past year, as many of its larger rivals have expanded coverage into rural markets. Ntelos signaled a change of direction this summer when long-time CEO James Hyde left the company just as the carrier posted mixed second-quarter financial results. Hyde had overseen dramatic moves by the company, including its decision in late 2010 to split up its wireline and wireless divisions, as well as signing the network deal with long-time network partner Sprint, which runs through 2022.
Ntelos has moved to diversify its offerings and partnerships, announcing an expansion earlier this year of a fixed LTE deployment with Dish Network. The service, which was initially announced last year, uses LTE technology in the 2.5 GHz spectrum band, which Ntelos controls, to connect to outdoor routers that receive signals from Ntelos’ tower sites. Those routers are linked using an Ethernet connection to a wireless router in a home to provide broadband Internet access at speeds up to 10 megabits per second. The offering was commercially launched in parts of Virginia, including Charlottesville, Waynesboro, Staunton, Harrisonburg and Roanoke.
For T-Mobile US, the spectrum deal bolsters its holdings in the 1.9 GHz band it is currently using to support its 2G and 3G services. The carrier has said it plans to refarm its 1.9 GHz spectrum assets to further support LTE services that currently rely on its 1.7/2.1 GHz spectrum holdings.
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Photo credit: Design Trolley
