AT&T’s CEO: After FirstNet tower climbs, 5G will be a software upgrade

AT&T’s CEO said Thursday morning that the company’s work to upgrade its network with FirstNet’s 700 MHz spectrum will position it to move to 5G network technology via a software upgrade.

“To build out this FirstNet capability, this first responder network, we have to go climb every cell tower. Literally, we have to go touch every cell tower over the next couple of years,” explained Randall Stephenson, AT&T’s chairman and CEO, in a appearance at an investor relations event. “As we're touching those cell towers, every single one of them, we have a lot of spectrum in inventory. We will be lighting that spectrum up as we touch each cell tower."

Added Stephenson: "We'll be equipping every single cell site for 5G such that, when 5G is ready to go, when it's ready for prime time, our turn-up of 5G is a software load, it’s a software upgrade.”

At the same event, AT&T CFO John Stephens explained that the carrier expects to have more than half of that work completed by next year.

“Through this year and into next year, we’ll have made a significant progress, probably over 50% of that build-out complete in that area,” he said. “So, the spending that we're doing today, will be able to be measured going forward because we've already done it, because we've already built it out and deployed the spectrum. And then, when it's time to put 5G in—we're doing all of this in wireline and wireless, but particularly wireless—we're doing all of this with a software-defined focus. So, we'll come back with 5G and it will be a software upgrade. It won't be the expensive capital spend that we've seen when we go to 2G to 3G or 3G to 4G. Because of these investments we've made over the years, this capital efficiency will be seen into the future.”

AT&T won the FirstNet contract last year, and plans to launch 5G in a dozen cities by the end of this year.

And both Stephens and Stephenson said that AT&T’s network spending will decrease in the coming months and years as it finishes its fiber build-out and FirstNet and 5G work. Specifically, Stephens said AT&T expects to finish its efforts to build out fiber to roughly 14 million locations within the next 12 months.

And once that spending is finished, they both said AT&T expects to reduce its debt load.

“That's the reason he and I are pretty much at peace with taking our debt-EBITDA [ratio] to 2.9X to get the [Time Warner] deal done, getting it down to 2.5X into next year, then getting it down to more normal levels,” Stephenson said. “There's just a very clear path of deleveraging that we're very, very comfortable with."

Those comments are noteworthy in light of an article recently in the Wall Street Journal warning that AT&T’s debt load would increase 12% to $181 billion as it closes its Time Warner purchase.

Separately, AT&T’s Stephenson also confirmed that he expects AT&T’s wireless service revenues to begin growing again in the second half of this year.

“I feel more comfortable today than I did a month ago,” he said of that target. “We'll be service revenue growth second half of the year."