Is T-Mobile shifting focus from midband 5G to fiber? Or UScellular?

T-Mobile is reportedly in discussions with Tillman FiberCo to expand its fiber ambitions beyond New York and Colorado. At the same time, there are growing indications that the operator isn't planning to move quickly to deploy its C-band and 3.45GHz midband spectrum holdings.

Further, T-Mobile is looking to improve its finances, having recently enacted a massive round of layoffs and a new dividend program.

Taken together, the developments could signal an effort by T-Mobile to cash in on years of heavy spending on 5G following the operator's $29 billion purchase of Sprint in 2020.

Broadly, T-Mobile is now working to position itself as a mature peer to telecom heavyweights like Verizon, AT&T and Comcast – companies that operate extensive wireline and wireless businesses – rather than a scrappy, upstart challenger focused exclusively on cheap service plans for smartphones.

The fiber calculation

According to a recent report from Bloomberg, T-Mobile is in talks with open access network operator Tillman FiberCo with a view to using Tillman FiberCo's fiber infrastructure as an anchor customer.

Tillman FiberCo was started in 2021 and recently announced a $200 million fiber teaming with Northleaf Capital Partners. Tillman FiberCo is part of Tillman Global Holdings, founded by telecom industry veteran Sanjiv Ahuja.

A T-Mobile deal with Tillman FiberCo would build on T-Mobile's early fiber pilot in New York City with Pilot Fiber. More recently, T-Mobile expanded its fiber efforts into Colorado by working with Intrepid Fiber, a startup backed by global investment giant Brookfield Infrastructure Partners. Intrepid too is working on an open access model with T-Mobile as an anchor customer.

"We are thinking about whether or not there is a capital-light way to enter that [fiber] business and take advantage of our embedded customer base and our fantastic brand," T-Mobile CEO Mike Sievert said at a recent investor event. "If we can find a way to do something really accretive and exciting ... we will do it."

The midband calculation

While T-Mobile evaluates its fiber options, the company appears to be taking a relatively relaxed approach to its additional midband 5G spectrum options.

"We do not think T-Mobile is in a rush to deploy additional spectrum given they have ~200MHz of midband capacity across their network," wrote the financial analysts at Wells Fargo of their recent meetings with T-Mobile officials. "They are looking to 'sequence' capital in high-ROI [return on investment] areas using a lean manufacturing methodology, making us think C-band/3.45GHz spectrum deployment will be phased in over an extended period."

Indeed, when questioned when T-Mobile might start deploying its C-Band/3.45GHz spectrum, CEO Mike Sievert said "I don't know."

However, T-Mobile's new networking chief Ulf Ewaldsson recently told Light Reading the operator would embark on "some initial deployments early next year" of its C-band spectrum.

T-Mobile spent around $10.7 billion on C-band spectrum in the FCC's 2021 auction. That C-band spectrum forms the core of Verizon's ongoing midband 5G buildout. T-Mobile also spent another $2.9 billion on 3.45GHz spectrum in the FCC's Auction 110 that ended in 2022.

In 2022, T-Mobile executives said they would "look at starting deployment of ... [3.45GHz] in 2023 in conjunction with the C-band spectrum." The executives also pointed to their desire for dual-band radios that can support both bands. But T-Mobile officials later clarified that the operator would start preparing for the buildout in 2023, and would embark on the buildout in 2024.

To be clear, T-Mobile's existing midband 5G network uses 2.5GHz spectrum. The operator has said it expects to operate an average of around 200MHz of that spectrum by the end of this year – a sizable amount.

Thus, T-Mobile's 2.5GHz buildout, which is almost done, could give the operator some breathing room before its next spectrum push.

Spectrum puts and spectrum takes

It's also worth noting that T-Mobile's spectrum adventures stretch far beyond 2.5GHz, C-band and 3.45GHz. For example, the company is working to purchase additional 600MHz spectrum licenses from both Comcast and Columbia Capital.

Interestingly, as noted by Spektrum Metrics, T-Mobile recently modified its 2022 purchase agreement with Columbia Capital to put spectrum across Dallas, New Orleans and Chicago into a subsequent transaction. In a recent SEC filing, T-Mobile explained that it did so in order to expedite the FCC approval process. The company now expects to close its purchase of most of Columbia's licenses in 2023, but the company doesn't expect to close its purchase of the Dallas, New Orleans and Chicago licenses until 2024.

Further, T-Mobile continues to work to divest some 800MHz licenses, per its 2019 agreement with the US Department of Justice (DoJ). Dish Network is first in line to purchase those licenses, but the company recently asked a Washington, DC, court for an additional ten months to raise the cash necessary to close the deal. In a new filing this week, the DoJ suggested the court give Dish an extra seven months.

The financial analysts at New Street believe the court will grant Dish an extra seven months to close the deal. They have also suggested that Dish might give T-Mobile some of its 600MHz holdings in New York in order to purchase T-Mobile's nationwide 800MHz licenses.

The bigger story

T-Mobile's efforts come amid a wide variety of dramatic developments within the US telecommunications industry. For example, the company may be interested in a fiber expansion in order to obtain US government subsidies for fiber networks in rural areas. The White House's Broadband Equity Access and Deployment (BEAD) program is expected to ultimately allocate $42.5 billion to states for mostly fiber network deployments in rural areas.

Owning a fiber network would also give T-Mobile better competitive footing against Verizon, AT&T and Comcast, all of which own extensive fiber operations.

But fiber isn't the only thing that T-Mobile could spend money on. UScellular, a regional wireless network operator with roughly 5 million mobile customers, recently put itself up for sale. T-Mobile's CEO indicated the company would consider that purchase.

"An acquisition of UScellular and of additional spectrum will likely yield higher returns than buying back stock," wrote the financial analysts at New Street of the possibility of a T-Mobile purchase of UScellular. "The benefits of a UScellular acquisition are obvious; the benefits of additional spectrum aren't quite so obvious. Whenever a carrier increases their share of spectrum relative to other carriers, they increase their claim on future share of industry revenues."

It's unclear what T-Mobile's Mike Sievert and the rest of his management team will ultimately decide to do. But it's certainly possible that the carrier is planning to take a slow and relaxed approach to its deployment of its C-band and 3.45GHz spectrum in the coming months and years, potentially to free up cash for a fiber play. Or an acquisition of UScellular.