Coming out of the AWS-3 auction, Verizon has repeatedly said it walked away from key markets like New York and Chicago because it would have had to spend $6 billion on spectrum where it can instead spend $1.5 billion on small cell deployments to achieve the same coverage.
But BTIG analyst Walter Piecyk isn’t so sure that math works out.
In a research note released Friday, Piecyk dug in to Verizon’s statements and came away uncertain the carrier can accomplish what it claims.
First, Piecyk’s analysis found Verizon bid on spectrum but lost in 14 of the top 40 markets where the winning bids totaled $6 billion. That’s where the $6 billion figure cited by Verizon CFO Fran Shammo comes from.
Assuming an average cost of $75,000 per small cell based on similar costs incurred by Zayo Group in its small cell deployment, Piecyk found a $1.5 billion investment from Verizon would cover approximately 20,000 new sites.
While Piecyk concluded such an investment would triple the number of cell sites in the 14 markets mentioned above, he noted small cells offer significantly less coverage than macro sites.
To fully replicate the coverage provided by macro sites in the 14 markets targeted by Verizon, Piecyk said Verizon would need to install more than one million small cells.
Piecyk said the installation of even a fraction of that figure – which he called an “untenable plan” to build 200,000 small cells – would hardly be covered by the $1.5 billion investment figure put forth by Verizon and would require a dubiously low cost of $7,500 per site.
But Piecyk said the math isn’t the only thing working against Verizon small cell claims.
“Deploying tens of thousands of small cells will be a challenge regardless of cost,” Piecyk wrote. “Easy site location opportunities on top of existing fiber could dry up as other carriers begin to compete for locations that are unable to support more than one operator.”
Piecyk said BTIG will continue to track Verizon’s use of its existing spectrum as well as its capital investments, but said the ultimate judge of Verizon’s performance will be consumers.
In the event that public perception of Verizon’s network performance sours, Piecyk said Verizon’s CTO Roger Gurnani might need to rethink his strategy and go after more mid-band spectrum from Dish.
Filed Under: Infrastructure