AT&T's FirstNet buildout could start as early as June, Barclays says

AT&T could start deploying the First Responder Network Authority (FirstNet) as early as June if it is awarded the contract next month, Barclays said.

The U.S. Federal Court of Claims ruled in favor of FirstNet on Friday, meaning the first broadband network devoted to public safety can proceed with a contract award. The 25-year contract is expected to bring additional business to infrastructure vendors and tower operators.

And if it’s awarded to AT&T—as widely expected—the carrier will get access to FirstNet’s 20 MHz of 700 MHz low-band spectrum and $6.5 billion for designing and operating the nationwide network for federal, state and local authorities, with the right to sell excess capacity on the system.

“Based on our discussions with the carrier, we think an April award of the contract could enable AT&T to start its deployment process as early as June,” Amir Rozwadowski of Barclays wrote in a research note. “A clear path towards the FirstNet award should unlock new spectrum deployment plans at AT&T. While the operator has been vocal on its opposition to current tower escalator structures for some time, we expect the deployment of close to 65 MHz of spectrum to support a constructive near to mid-term spending backdrop for the towers and CommScope’s domestic wireless business.”

AT&T has moved aggressively over the last year to renegotiate terms with tower companies to cut costs in an increasingly competitive wireless market, and analysts say that effort has paid dividends. But the carrier “is turning on the wireless network spending faucet” on small cells, backhaul and “mods”—modifications of traditional towers, Wells Fargo observed last month.

Analysts generally agree that tower companies stand to benefit significantly if AT&T is awarded the FirstNet contract. And that would be good news for a segment that has struggled in recent months as carriers have reined in capex investments amid an extremely competitive U.S. wireless market.

Jennifer Fritzsche of Wells Fargo Securities said earlier this month that AT&T “has plans to touch over 40,000 towers (both new and existing) over the next five years” if it wins the FirstNet contract, which would mark “more activity than the towers have seen” from the carrier since 2014.

Rozwadowski echoed those thoughts, saying CommScope is particularly well positioned to benefit from increased spending from AT&T.

“Tempered spending out of AT&T has been a headwind for the industry for the last several quarters,” Rozwadowski wrote. “Despite the carrier being vocal on its opposition to current tower escalator structures, on balance we expect a net positive effect to their businesses as it looks to nearly double capacity between now and 2019. In our view, management believes its ability to do so will provide AT&T with a competitive edge, particularly during a period of rising competition spurred by unlimited pricing plans. We also consider new spectrum deployment at AT&T a benefit for CommScope given what we believe are conservative expectations embedded into its outlook for its U.S. wireless business.”