Telus-Bell network sharing to reap savings in LTE deployments: Canaccord

Telus Communications Co. and BCE Inc. are poised for a better return on capital in the gradual conversion to fourth-generation LTE, Canaccord Genuity said in a research note to clients Friday. The projection are based on assumptions that the two companies will extend a 10-year network sharing agreement to their new LTE services—a move that could save each company over $300 million in capital expenditures as they deploy a national 4G network, the report said. The report estimates it would cost a single provider $500 million to launch LTE across Canada’s urban markets and $800 million to build a national network. Canaccord notes that Rogers Communications Corp. is left without a suitable partner for a similar network-sharing agreement. “ decision to abandon wireless highlights how difficult it is for Rogers to co-operate with Shaw and Videotron in wireless because Rogers has significant market share in Western Canada and Quebec and is decades ahead of its cable peers in wireless,” the report, authored by Canaccord analyst Dvai Ghose and research associate Sanford Lee, said. “If Bell and TELUS use their shared fixed-cost savings to further enhance LTE access and backhaul, Rogers would have an inferior network or would have to match with incremental capital. This implies a better return on capital for Bell and TELUS.” Telus may be poised to see the biggest returns on LTE if it can maintain momentum gained with the steady rollout of its HSPA network, the research note said. Bell and Rogers saw declining margins and shrinking lifetime revenue per customer estimations in the first half of 2011, but Telus’s margins crept upwards as its estimated lifetime revenues per customer remained flat. With a combined 8,200 cell sites and fibre backhaul now in place in urban markets, Bell and Telus have an apparent advantage over Rogers, which has 5,000 cell sites across the country. The advantage may be misleading, the research note added, as many Bell and Telus sites are overlapping and as “Rogers enjoys robust backhaul, as well.” The report noted the problems that newer and faster LTE networks could pose for new market entrants—like Videotron and Wind Mobile—which are typically still building their HSPA networks and are less likely, for now, to spend capital expenditures on LTE. Overall, the report noted that LTE is expected to increase bandwidth and spectrum frequency efficiency by as much as 400 per cent but that those benefits won’t have a significant impact on the wireless market until LTE-equipped smartphones become available later this year and next. The research note added that efforts by the large wireless providers to rollout LTE is likely to please regulators because it will demonstrate the use of AWS spectrum licences awarded in an auction in 2008 and challenge suggestions that the companies are slow to introduce new technologies into the Canadian marketplace. Rogers became the first Canadian provider to offer commercial LTE services when it launched its local LTE network in Ottawa on July 7. The company also has plans to deploy LTE in Toronto on Sept. 28 and in Montreal and Vancouver this year. Bell launched LTE networks in and around the Toronto region earlier this week, including in parts of Hamilton, Guelph and Kitchener-Waterloo. Telus has announced intentions to deploy LTE in urban markets in early 2012. news@thewirereport.ca

Telus-Bell network sharing to reap savings in LTE deployments: Canaccord

News | September 16, 2011

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