x
5G

Gogo guards 5G plan despite downturn

Companies that sell into the travel industry have been hit particularly hard by the COVID-19 pandemic, especially those that sell to airlines. That includes in-flight connectivity provider Gogo Wireless, whose CEO Oakleigh Thorne recently told investors that he would describe March 2020 as "the worst of times," except for the fact that April was even worse.

Still, Gogo has not given up on its vision of bringing 5G to the skies. The company still plans to upgrade its 250 cell towers to 5G using AirSpan's virtualized RAN basestation technology, a "proprietary modem," and massive MIMO antennas. Those will transmit in the unlicensed 2.4GHz band to plane-mounted antennas made by First RF. The radio access network will be supported by Cisco's software-defined core network.

Gogo says the price tag for all this will be about $100 million, with half of that slated for 2021. Roughly $66 million of the total will be capital investment, the rest will be operating expense. Gogo reported $2.1 million in operating expense related to its 5G program during the first quarter. Thorne clearly doesn't want to abandon Gogo's 5G plan, but he said on Gogo's earnings call this week that he would delay if he had to in order "to meet our financial objectives."

The company's primary financial objective is staying solvent during this unpredictable time. The company lost $84 million in its most recent quarter, and in April sales were off 66% versus last year. Analyst Ric Prentiss of Wall Street research firm Raymond James thinks Gogo needs to maintain about $50 million of liquidity to run its business, and it needs to pay almost $53 million in interest this month to service its debt. The company had $214 million in cash on hand at the end of March.

So can Gogo afford to build its 5G network despite the COVID-19 crisis? Thorne said 5G spending cuts are on the table, but may be avoidable. For now, Gogo has cut costs by furloughing more than half its workforce, reducing pay for many of those who remain, and renegotiating payment terms with suppliers and satellite providers. (Customers that don't use Gogo's terrestrial network use satellites to connect to the Internet.)

Gogo CFO Barry Rowan told investors that Gogo doesn't have to build the entire network in order to deliver 5G to airline passengers. "You don't have to have, of course, nearly all the cell sites in order to get the Gogo 5G experience," he said, according to a Seeking Alpha transcript of his remarks. "They can be deployed in part and then you layer in the additional cell site deployment as required to service the capacity needs."

One reason Gogo may be so determined to maintain its commitment to 5G is the fact that it was forced to skip 4G for the most part. The company tried to upgrade its terrestrial network to 4G using equipment made by China's ZTE, but scrapped those plans when President Trump temporarily suspended ZTE's US business because of security concerns.

— Martha DeGrasse, special to Light Reading. Follow her @mardegrasse

Be the first to post a comment regarding this story.
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE