Trillions of Texts Add Up to Billions in Telecom Investment

American’s text, talk and share over mobile devices, generating trillions of conversations and downloads. The growing habit has cost telecom providers billions of dollars. Since the consumer trend continues to grow, so will the investment. Among the questions this raises are whether these investments can stay profitable and how much they will challenge the balance sheets of participants.

CTIA – The Wireless Association, which promotes the interests of the U.S. wireless communications industry, says of the data usage of Americans:

Americans used 9.6 trillion megabytes (MB) of data in 2015, three times the 3.2 trillion MB in 2013. This is the equivalent of consumers streaming 59,219 videos every minute or roughly 18 million MB.

Smartphones are the number one wireless device in the U.S. and still growing

There were more than 228 million smartphones, which was up almost 10 percent from 2014. 70 percent of the population now owns a smartphone.

There were more than 41 million tablets on wireless networks, up 16 percent from 2014.

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To handle the increase in devices and usage, America’s wireless carriers invested almost $32 billion in 2015, including adding almost 10,000 new cell sites. Since 2010, carriers have invested more than $177 billion to improve their coverage and capacity to better serve all Americans.

Which leads to the question of how deep the pockets of the four major carriers are. AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) have the balance sheets to invest tens of billions more in infrastructure costs. T-Mobile US Inc. (NASDAQ: TMUS) may have to struggle to stay even. By most reports, Sprint Corp. (NYSE: S) has fallen behind.

T-Mobile has shown signs that it has enough money to compete, although Deutsche Telekom, its largest shareholder, is a wild card. A recent evaluation by research operation OpenSignal showed, according to Wired:

T-Mobile’s ascendency shouldn’t come as a huge surprise to those who have tracked its recent infrastructural gains. Specifically, in January of 2014 the company announced it would acquire $2.365 billion worth of 700MHz spectrum (from, as it happens, Verizon). The 700MHz spectrum is significant because it has what T-Mobile had until then lacked: range, and penetration.

On the other hand, FierceWireless reported:

T-Mobile announced plans to issue $1 billion in bonds to fund the acquisition of more 700 MHz A Block spectrum and other airwaves.

The nation’s third-largest carrier has spent more than $1 billion in recent months to buy 700 MHz licenses from Cellular South, Cavalier, C700 and others to cover major areas in the Southwest and Southeast.

T-Mobile has to rely more heavily on the capital markets than AT&T and Verizon do, which could become a disadvantage.