The past week saw quite a few developments in the telecom sector. Rumors started floating in the industry that the FCC is prepared to approve Verizon’s (NYSE:VZ) spectrum purchase from the cable companies, but anti-competitive concerns over its side cross-marketing deals with the later still remain. AT&T (NYSE:T) announced the addition of seven more markets to its growing LTE footprint that now covers a total of 80 million people in the U.S. Sprint (NYSE:S), meanwhile, is set to launch its first LTE markets on July 15. However, with the iPhone 5 launch drawing near, it will look to promote its unlimited plans more than LTE in much the same way as it did last year.
It seems likely that Verizon will be able to cross regulatory roadblocks and get its hands on a huge swath of AWS spectrum it needs for LTE expansion. A Reuters report cites sources familiar with the developments that the FCC is prepared to give a go-ahead to Verizon’s plan of buying the airwaves from the cable companies.  However, anti-competitive concerns still remain on another aspect of the deal that involves cross-marketing agreements between Verizon and the cable companies, Comcast (NASDAQ:CMCSA), Time Warner (NYSE:TWC) and Cox Networks.
We believe that the spectrum purchase is the more important aspect of the deal since it impacts Verizon’s LTE expansion plans and gives it the all-important spectrum that will help it fight the spectrum crunch that is plaguing the industry. With AT&T clawing at its heels and Sprint entering the fray soon, Verizon will need to maintain its LTE advantage and stay ahead of the game. We are not, however, saying that the cross-marketing deals are not important since it will help Verizon’s services gain more prominence in some of the biggest cable company stores, but LTE and spectrum seem to be the priorities for now considering the current wireless dynamics. (see Verizon Likely To Receive FCC Approval For Cable Spectrum Purchase)
AT&T on Monday announced the addition of seven more markets to its growing LTE footprint that now covers a total of 80 million people in the U.S. The nation’s second largest wireless carrier is lagging Verizon in terms of LTE coverage but has its more widespread HSPA+ network as an interim high-speed solution for its subscribers. Together, both of AT&T’s high-speed networks cover more than 260 million Americans in all, which is well ahead of Verizon’s LTE coverage. However, with LTE being more efficient and faster than other ’4G’ technologies and the growing availability of LTE capable smartphones, AT&T will be looking to increase its LTE coverage to catch up with Verizon soon. (see AT&T Expanding Its LTE Network As Juicy Data Revenues Flow)
With the iPhone 5 is likely to be launched this fall, wireless carriers are getting ready to market their services. One key factor that we believe will differentiate this generation of the iPhone from the previous ones, apart from a possible change in form-factor and better processor, is the availability of an LTE-compatible chipset.
While carriers such as Verizon and AT&T getting ready to tout their respective LTE networks, late-entrant Sprint is just starting to roll out its first LTE markets on July 15. Its marketing strategy will therefore most likely remain unchanged from last year when it aggressively promoted its unlimited plans. But is that going to be a big deterrent for Sprint to move more iPhones out of the door in order to meet its huge commitment to Apple?
Going by the effectiveness of Sprint’s strategy last year and the higher long-term value that we see subscribers attaching to Sprint’s unlimited LTE plans this year, we do not think so. (see Sprint Woos iPhone 5 Buyers With Unlimited Plans Despite LTE Disadvantage for a detailed analysis)Notes:
- Verizon’s cable deals make headway but regulatory doubts linger, Reuters, July 9th, 2012 [↩]