Current network investments key to merged Sprint, T-Mobile US

Sprint CFO Andrew Davies, speaking earlier this month at the Bank of America Merrill Lynch Leveraged Finance Conference in Boca Raton, Florida, described the network investment strategy that colors decision-making as regulators review a proposal for Sprint to merge with T-Mobile US.

Davies made clear that current capital investments will be “foundational” to the merged company, particularly deployment of 2.5 GHz spectrum, small cell densification and massive MIMO.

Noting 2018 capex totaling $2.4 billion at the end of September, Davies said, “We are rolling out the network. We are fulfilling on the next-gen network initiatives that we’ve discussed. What does that involve? It’s rolling out 2.5 GHz across the majority of the cell sites by the end of this year. We’re already at 70%. We are densifying the network. We have now got more than 20,000 small cells in place. Then there’s the rollout of massive MIMO. All of these things are going to be foundational for the merged company assuming we get the merger approved. We don’t see much risk the capital we’re deploying this year is going to end up being stranded. The merged company will need that 2.5 GHz spectrum fully deployed. It’s going to need massive MIMO. And it’s going to need the densification of small cells.”

The two carriers have discussed a $10 billion, three-year network integration plan. Davies explained a good portion of that figure is related to paying off long-term cell site leases.

Davies joined Sprint earlier this year after the two companies had agreed to merger terms, which he described as “a unique kind of challenge. Part of the challenge, both for me as an individual but more so in my role as a CFO, is to bring extreme rigor and discipline in terms of the choices that we make and the prioritization that we put into initiatives. There’s a bunch of stuff that I’d love to get into as the CFO that I’ve consciously stopped doing.”

He continued: “For example, we have back office architecture and processes which are probably a decade behind the times. I’d love to get into those and fix them but I can’t because that’s a two- or three-year program. We need to make sure that the things we put in place…we’re either confident that they’re going to survive the merger and integration process and that they bring value to the merged company, or they are things where we are going to get a cash payback by the end of this fiscal year.”