How Does The Cost Of Services Of Major U.S. Wireless Carriers Stack Up?

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The cost of services for a wireless carrier capture the various expenses associated with operating and maintaining a wireless network and are a key determinant of a carrier’s operating margins. Key fixed cost components include cell site costs such as rent, maintenance, utilities and labor costs as well as regulatory fees. Variable cost components include interconnection charges and roaming fees paid to carriers as well as content costs. Below,we take a look a how Verizon (NYSE:VZ), Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) stack up in terms of their services spending. Note that AT&T (NYSE:T) does not break-down wireless cost of service.

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  • The costs of operating wireless networks are relatively high for U.S. carriers compared to most international markets, on account of the country’s large geographic area – which calls for a greater number of cell sites – and due to higher data traffic.
  • Sprint has the highest cost of service per subscriber, on account of its smaller subscriber base and likely higher network backhaul expenses. However, Sprint could see these costs decline going forward as it works on its ambitious network densification plan, which could potentially cut backhaul expenses by over $1 billion per year.
  • Verizon’s costs per subscriber are the lowest, as its larger subscriber base improves fixed cost absorption, enabling it to have among the strongest operating margins in the wireless business.

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