MetroPCS taps EVDO during LTE transition
MetroPCS shed some light on its transition from CDMA to LTE during the Bank of America Merrill Lynch Media, Communications & Entertainment Conference yesterday, when CFO Braxton Carter talked about how the prepaid operator is handling rising data traffic on its legacy network as it moves customers over to its new network.
MetroPCS will have invested nearly $1 billion in the new LTE network between 2009 and 2012, Carter said, but it must wait for device prices to come down before it can make a major push to get customers off of its legacy gear and onto the new network.
"We really can't start putting significant amount of our customers onto that LTE network, which will bring a lot of efficiency to it, until the ecosystem develops so we have affordable LTE handsets," Carter said. MetroPCS is waiting for LTE devices to drop below the $200 mark. "The good news is that a lot of that investment is already behind us. The bad news is we're in this transition period."
The operator has already deployed LTE in all of its 14 metropolitan markets, though a shortage of spectrum precludes the network from being as fast as the mobile broadband service offered by Verizon Wireless and Clearwire.
Android smartphones have become increasingly popular with MetroPCS' customers, forcing MetroPCS to add capacity to its legacy network to address the devices' heavy data use. Specifically, Carter said MetroPCS was deploying EVDO to about one-fifth of its CDMA 1X cell sites to address a capacity crunch.
"This quarter, we're deploying EVDO in roughly a little less than 20 percent or our sites in our footprint in all of our markets," Carter said, citing "data usage from Android." He added: "The cumulative investment will be less than $100 million by the end of the year, but we've been seeing very positive results from that."
The EVDO deployments seem to be doing the trick. Carter said that about a third of the way through deploying EVDO carriers in MetroPCS' Dallas/Ft. Worth market, it saw "30 percent offloading of capacity on our core switching."
Wi-Fi offload is playing a key role in helping MetroPCS cope with mounting data use. All of MetroPCS' smartphones have a Wi-Fi offload capacity. Up to 70 percent of the devices' data traffic is being routed through Wi-Fi in some cases, Carter said.
Investors have been keeping an eye on MetroPCS' profitability as it increases its smartphone offerings and invests in its new network. Android subsidies ate into profits last quarter and churn increased – not the trends investors wanted to see out of the company's smartphone strategy.
Carter reassured investors that MetroPCS was working to turn the numbers around but warned that churn would rise in the third quarter, as previously predicted.
Citing MetroPCS' EBITDA (earnings before interest, taxes, depreciation and amortization) margin range of roughly 30 percent, Carter said, "That's certainly not where ATT and Verizon are, given the massive scale that they have, but it is equivalent to where T-Mobile is executing at and almost double where Sprint is executing at."
In translation: MetroPCS is doing well, even without the size and scale advantage of its larger competitors.