T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

0m10s Speaker 0

Hello, and welcome to the two hundred and forty fifth episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Antner. How you doing, Roger?

0m23s Speaker 1

I'm great, and I'm excited to have a wonderful guest.

0m26s Speaker 0

So I'm excited too, Roger. We have a great guest today, Jim Patterson, longtime telecom industry insider and CEO of Sellsite Solutions. Jim, welcome to the podcast.

0m36s Speaker 2

Hey, it's a pleasure to be here.

0m38s Speaker 1

Jim, I'm so excited. You reminded me that we had a recording of something like this, like, it must be fifteen years ago, if not longer, with Jan Dawson, who was at that time my colleague at Ovum, who is now at Vivint. Big shout out to Jan. I I miss working with him. And now we're here again.

1m2s Speaker 1

I think it has been too long. We should do this, you know, after this. Not we shouldn't wait for fifteen years. But it's really exciting.

1m8s Speaker 2

No. Definitely not. It's a pleasure to be here, Roger. Thank you for having me on.

1m13s Speaker 1

So I met you when you were at Sprint. I think you were running wholesale, right?

1m19s Speaker 2

Correct. Wholesale and this upstart business unit called Machine to Machine at that time, that's what we called it. And we were launching this new fangled product called the Amazon Kindle.

1m30s Speaker 1

Yeah. I'm using that thing every day. Because my eyes go bad, so I'm using it.

1m36s Speaker 2

Before it was Wi Fi, there was a day.

1m38s Speaker 0

WhisperNet. Right? Wasn't it called WhisperNet?

1m40s Speaker 1

We were

1m40s Speaker 2

the original WhisperNet. Yes. Because we were the only ones that would offer a per megabyte price to Amazon at the time.

1m48s Speaker 0

It was on two g at the time as well. Right? Wasn't it?

1m51s Speaker 2

Two g and three g.

1m52s Speaker 0

Okay.

1m52s Speaker 1

Yep. But it doesn't matter. You know, that book is really small. And then you became an analyst, then you worked for if I remember your career, you were then at a fiber company.

2m4s Speaker 2

That was at Fastwire. Yep. Formerly known as American Broadband. Before that, though you know Roger, I set up MVNOs for a company called ACN, and we set up several across the globe. So I took a lot of my learnings from one side of the table, that being the carrier wholesale side, and then turned around and sat on the other side of the table and worked a lot with MVNOs and MVDs.

2m27s Speaker 2

Four countries. We did four countries in three years.

2m30s Speaker 0

Oh, we should talk.

2m31s Speaker 1

A lot

2m31s Speaker 2

of work.

2m31s Speaker 0

We should talk about that.

2m33s Speaker 2

And then also had a startup right after I left Sprint, which was purchased and allowed me to be an early executive, not very long, but an early executive at what is now called Reliance Jio. So it's been a very, very good career, bunch of different areas, got to see a lot of different things. Now I'm on the other side of the another side of the table, and that's as a supplier to the industry.

2m56s Speaker 1

Yeah. And you have a terrific newsletter every other Sunday called the Sunday Brief, which I read every time it comes out and and enjoy it.

3m5s Speaker 2

Thank you, Roger. It's a some people have gardening or running or sports as hobbies, and mine is kinda writing that every couple of weeks. So on our fifteenth year, and it's a pleasure to write. And it's a good way for me to stay in touch with many, many different folks across the industry.

3m22s Speaker 1

So tell us more about sell site.

3m24s Speaker 2

Sure. Sell site solutions at the base of a sell site are these buildings and those buildings occasionally, you know, because of consolidation are empty. Right? And so we take the buildings no one else wants, and we decommission them from the site. And we take them back here to Cedar Rapids, Iowa.

3m44s Speaker 2

That's the main headquarters of cell site, and we completely got the building. New roof, new floor, new interior walls. They're usually concrete structures. So they're still very sturdy, but the insides of the structures for various reasons need to be completely replaced. It's a truly an a like new structure.

4m4s Speaker 2

Coming out of that, you have a just a lovely, lovely structure, and we that becomes a fiber hut for many fiber to the home providers. It becomes an E911 hut for many, many, many E911 providers, municipalities. And we also serve a large portion of the electric co ops that are extending their footprint beyond just providing electricity, but also providing Internet services. So really fun for me because I get to see so many different areas of growth in the industry. Recently, kind of our our new area of growth, which I know will be of interest to you is what I call fracturing of the data center in the hunt for power and compute processing takes a lot of power.

4m48s Speaker 2

Many of the hyperscalers that we know and love are building and are expanding very quickly into rural America. And it's driven largely by where they can find cheap power. And as a result, they're not building billion dollar data centers, but they're coming to us and to others. But a lot of them are coming to us and saying, I need a 12 by 36 shelter that fits 20 racks. They usually want 400 or 600 amp serving that serving each building and they're stacking up six and eight buildings.

5m19s Speaker 2

So that's a big a big portion of what I do. And and it's fun because you get to see so many different areas of the telecom industry, in fact, more than I saw before being on the service provider side.

5m30s Speaker 1

Awesome.

5m31s Speaker 2

Yeah, it's really neat. The other thing that's important is, and we get a lot of calls on this is because of our remanufacturing process and because of our location, and frankly, because of the size of our facility, we're able to turn around shelters, you know, standard build shelters. And everyone that comes into our facility here in Cedar Rapids is all custom built, built to spec. We're able to turn those around in, you know, six weeks, eight weeks, twelve weeks. And our competitors, we just had one quote municipality on California.

6m3s Speaker 2

They were quoting them forty eight weeks and we quoted them twelve. And they are pleased as punch because they're gonna be able to get a project in this year that they would have had to have waited till, you know, middle of next year to get done.

6m15s Speaker 1

Well, we're big fans of FAST here.

6m17s Speaker 2

Yes. Yes. The other big thing, and I know you're big fan of this too, is the remanufacturing process consumes much less energy as a whole because we obviously, we begin with something that's already reusing large portions of the existing shelter. So from a sustainability perspective, we are working the final parts of the engineering study right now, but I think it's safe to say we're at least 60% more energy efficient than a new shelter built. So many of these middle mile companies that we work with and last mile companies that we work with are owned by private equity firms.

6m51s Speaker 2

And, you know, they care about making a lot of money, but they also care about our environment. And it's a very sustainable

6m58s Speaker 1

Do they still care about that after the election? A lot of people change their mind, right?

7m3s Speaker 2

I was told that we were the leading critical infrastructure company for the circular economy. I didn't know such a thing existed until I was given that award, but I'll take it. I'll take all the awards that I can get.

7m17s Speaker 1

I'll take any award I get.

7m19s Speaker 2

Based in Cedar Rapids, about a 100 employees. The way the company works is we'll do anything 10 foot below that is at a cell site. And we also produce shelters from eight by eight all the way through 12 by 30 gen rooms that have generator rooms inside.

7m35s Speaker 1

Awesome.

7m36s Speaker 2

And 12 by 30 sixes too. Sorry. We just started doing

7m39s Speaker 1

So let's switch gears. Right?

7m41s Speaker 2

Sounds great.

7m42s Speaker 1

We had two big transactions in telecom in the last, what, week? Correct. Charter bought Cox, and will rename itself to Cox in a year or so. And AT and T bought the consumer fiber business of Lumen and will not rename itself to Lumen.

8m3s Speaker 2

Yes. That's probably a wise move on John Stankey's part. Yeah. And Jeff McElfresh's part. Yes.

8m8s Speaker 2

Very wise. Yes.

8m9s Speaker 1

John's a smart guy.

8m11s Speaker 2

Very smart.

8m12s Speaker 1

Why don't you tell us about it?

8m13s Speaker 2

As you know, Roger, and as you referenced, I think a lot about and the nice thing about thinking about the industry and analyzing the industry and being an executive in the industry for as many years as I have is you feel like you've seen everything. To see Charter purchase Cox was a little bit of a surprise. We all have first reactions to things. And my first reaction was, well, this does provide the Cox family a means to be able to liquidate their investment in the cable business. Right?

8m40s Speaker 2

And that's not a negative thing. It's just big family, and it's a really big business. And they get to hold on to these other portions of Cox Enterprises that are growing and growing very rapidly. What I think about with Cox is, again, I hate to come back to this and Roger, you may take a slightly different view, but I think about this all about how do we grow and converge services? And when I think about Cox, I think of a company that was truly late.

9m5s Speaker 2

They know a lot about mobile. They've been involved in mobile and for PCS and Orange County Trials and all that stuff in the nineties, but they've been late to the table, I think. And Charter's gonna supercharge that.

9m16s Speaker 1

That could be the tagline, late to the table, right? And expensive. When I looked at this, it's incredibly difficult to predict M and A activity when it involves a family owner. Because I remember being fresh in the industry at a CTIA dinner, I think I told that story before. It was 02/2001, I was a Yankee, and I was at that dinner and there was a table with UScellular guys, and I said, Guys, you're dead men walking.

9m46s Speaker 1

And they were laughing me in the face. Well, for what, twenty three years they were right, or twenty two. Because fundamentally, I think I was right because I read the fundamentals. But the fundamentals don't matter to families, right?

10m1s Speaker 2

Correct.

10m2s Speaker 1

And family owners, there's a

10m3s Speaker 2

lot

10m3s Speaker 1

more personality and personal preferences at stake. And knowing a lot of private owners of big, big companies, money is not the only thing, they have more than enough of it. With Cox, you know, I think what the Cox family did is it changed houses, it moves it into Charter, it gets a better management team, no disrespect to the Cox team, but Charter team is awesome. And I know a lot of them, we worked a lot with them. They are awesome.

10m34s Speaker 1

And they get a faster expansion. And the Cox family still gets 23% of the ownership stake.

10m43s Speaker 2

Right, that's a big deal.

10m45s Speaker 1

And they got $4,000,000,000 in cash, which allows them to go breakfast every morning in whatever place they want to go, which is important, right? And that's it, right? And for Charter, it's like, we're gonna get bigger. And I looked at it like, this is like the Disney plan. We gobble everybody up and we'll get so big that nobody can buy us.

11m5s Speaker 2

Well, think their plan is, and by the way, as you said, Roger, they have brilliant, brilliant business people. What they also looked at is, this kind of dovetails into the second acquisition is, they looked at Cox and said, well, where is Cox's competition? Right? Phoenix, it's Lumen. Las Vegas, it's Lumen.

11m24s Speaker 2

They got a little bit with AT and T, not a little bit, they have a meaningful presence in Southern California and and Orange County. That's AT and T.

11m31s Speaker 1

AT and T is their number one competitor. But the two transactions had nothing to do with each other.

11m36s Speaker 2

Little bit of Verizon in Virginia and a little bit of Verizon in Rhode Island. Omaha. Sorry. Who could forget Omaha? So you guys got Omaha.

11m44s Speaker 2

But Cox has been able to kind of compete solely on my broadband's better than your broadband. And by the way, they're winning. Right? They have a substantial market share where they've competed. But as you said, they are also the ARPU leader, I think is a nice way of saying it, right?

11m59s Speaker 2

I don't know if they still have it, but until recently they still had caps on data. Like they were charging you for, if you went over, you know, it was a large number, but let's just say it's one terabyte of data or something like that. It was pretty high and I was surprised. All I'm gonna say to this is Charter, because of their experience integrating the Brighthouse asset and integrating Time Warner into Charter, I think the execution risk is minimal. They will apply the processes that they have and know and love for selling mobile into everything, and they'll do a good job of it.

12m33s Speaker 1

Our friend, Danny Bowman is EVP of Product there.

12m36s Speaker 2

And David's his right hand person.

12m38s Speaker 1

And David is there.

12m39s Speaker 2

And David Rock Morton's his right hand person. I mean, it's a very good group.

12m43s Speaker 1

Very, very good group. But the two acquisitions had nothing to do with each other.

12m47s Speaker 2

No. No.

12m48s Speaker 1

It was very well known that Lumen's mass market was on the market. And we talked about it here briefly. And to me, it was either AT and T or T Mobile who would buy this.

13m0s Speaker 2

Right.

13m1s Speaker 1

And especially now that we know, I thought the only thing that would hold back T Mobile to buy it is that it comes with they would come with copper. But this transaction doesn't come with copper. Right?

13m15s Speaker 2

I posted on LinkedIn this morning. I said, let's get out the divestiture tape. Sorry, for those of you who are not as experienced as Roger and I are in 1983 when AT and T was divested or the Bells were divested from AT and T, the long distance company, they had to literally get tape out to say, can't go on this side of the central office. We're gonna be taping down the central office once again. This time, it's just gonna be keeping AT and T out from Lumen's central office asset.

13m40s Speaker 2

I found that to be a pretty intriguing demark point. Yep. It's a little lengthy for this podcast to kind of go into the details of why, But having deployed fiber, I'm wondering how AT and T's expansion will in the old days, we call it the wire serving footprint. Right? The wire center footprint.

13m58s Speaker 2

I'm wondering how that's all gonna work out between the two companies. It'll be interesting to see.

14m2s Speaker 1

So they bought, you know, the metro backhaul from Lumen, they bought access to the CEOs, the COs. And I think ultimately, they will probably do their own metro and do their own connection center.

14m17s Speaker 2

You have to think, Roger, that, again, goes back a few years, but because of the TCG acquisition, they already have fiber connectivity to almost all of the central offices.

14m26s Speaker 1

Oh, yeah, absolutely.

14m27s Speaker 2

You have to believe that that's the case.

14m29s Speaker 1

They have backhaul, they serve business customers there, they have a solid presence. And I think not knowing any of the details, right, they're like, We'll do this, and while we have that deal with Lumen, we're going to build our own stuff. Because John Stankey is a big believer in fiber, It has proven him right. He will go down as one of the great AT and T CEOs with his bet on fiber. And I think he will bet on his own fiber again in the old US West footprint.

15m3s Speaker 1

Right?

15m3s Speaker 2

What I wanna say in this one is the winner is Dicom. Right? Because Dicom's a major provider to AT and T today for fiber services. And one would have to think that they're licking their chops at this acquisition.

15m15s Speaker 1

Oh, yeah.

15m15s Speaker 2

The the shirt looks ready. Guys. Yeah. Really good. It's gonna get it deployed in more places.

15m21s Speaker 2

It's disproportionately negative for Comcast just simply because you have a few more territories, but it's gonna increase the AT and T's build in Phoenix alone. It's gonna be a massive, massive undertaking, massive undertaking.

15m34s Speaker 1

And I think here again, the Lumen assets are getting the better management team with a lot more focus on consumer fiber than Lumen, that where it's like pretty much neglected. They dabbled in it, but I think AT and T will take this to the next level. But it's very interesting that they also talked about that they are going to spin this off again into a JV.

15m58s Speaker 2

Yes. Yes. External ownership. That's the other one that you kinda read and kinda go, but that may be dissatisfy some sort of regulatory concern. I'm not exactly sure why they would do that.

16m10s Speaker 2

They definitely will have control over architecture. And I'm guessing there'll be a tremendous amount of shared services. Otherwise, you couldn't recognize the synergies that they'll be able to recognize. The other thing I was gonna ask you, Roger, because I hadn't really thought about it, but how does this impact AT and T's relationship with Giga Power? What's your thought on that?

16m27s Speaker 1

Well, I don't think it changes either way. Right? They basically gave themselves a year now. Bill Hoch is running Giga Power. You know, Bill Hoch, good friend, AT and T veteran.

16m39s Speaker 1

He ran the AT and T network. He was president of ATO, and he's now running GigaPower. So it is an open question of who is that second party. It could be very well that they will fold it into GigaPower or they will call it super duper power. Who knows?

16m58s Speaker 1

You know?

16m58s Speaker 2

Luminescence, right?

17m0s Speaker 1

Yeah, luminescence power. Luminescent

17m1s Speaker 2

power. There we go. You know?

17m3s Speaker 1

Something like that. Plasma. Yeah. I don't think that the two, A, the two will not compete against each other. No.

17m11s Speaker 1

And would have never competed against each other, because Giga Power follows a fiber first strategy, which means that they don't go where there is another fiber provider. And so they would have never run into them anyway. And so I think it's perfectly complementary. And AT and T is doing a really smart thing by saying, let's see where we can get the best deal. You know, maybe from BlackRock, with who we do the Giga Power thing, Maybe somebody else.

17m39s Speaker 2

Could be. Yeah, I imagine they'll have plenty of interest. It's a very good transaction for AT and T.

17m45s Speaker 1

And I don't think there will be any regulatory issues for either one of them. But the other thing that's really important is the price points. They are half of what others have gone for in the recent past. So I've talked with some of my smaller telco who are running fiber and building fiber, and they were like, man, this is like putting an amper on all of our valuations. And oh my God, both of them must have been really motivated to sell.

18m16s Speaker 1

We're seeing motivated sellers, not motivated buyers.

18m20s Speaker 2

Good point, good point.

18m22s Speaker 1

And so the repercussions of this, we will feel with, to a certain extent, how much fiber will get built out, because BEAT is currently, you wanna call it in reviews, others will call it in doubt.

18m35s Speaker 2

It's gonna get scaled back a little bit, we think. I mean, who knows?

18m38s Speaker 1

It makes sense, right? To scale it differently.

18m41s Speaker 2

Yes, yes, true.

18m43s Speaker 1

But it will influence a lot of self funded fiber build out.

18m48s Speaker 2

Yes, Yes. What an interesting time to be in this industry, isn't it?

18m52s Speaker 1

It's amazing. So awesome. You know, Jim, we should do this again.

18m57s Speaker 2

We definitely should, Roger. I miss our time together.

19m1s Speaker 1

Me too.

19m2s Speaker 2

If you are ever in Cedar Rapids, you know. And if any of your listeners are in Cedar Rapids, please come see us. We get plenty of tours.

19m9s Speaker 1

Awesome. And it comes with something to drink and something to eat, I bet.

19m13s Speaker 2

Oh, definitely. Definitely.

19m14s Speaker 1

Okay. Perfect. Next time I'm in Cedar Rapids, I will come by.

19m18s Speaker 0

Alright, Jim. Thanks for coming on, Roger. We'll talk next week.

19m22s Speaker 1

Alright. Thank you.