LTE comes with a twist on the 1.8GHz band

The telecommunications (telco) sector is set for the next platform of growth and expansion in the much anticipated fourth generation (4G) Long Term Evolution (LTE) spectrum as cellular companies (celcos) are rolling out their package plans with a slight twist.

Maxis Bhd (Maxis) had in­troduced its iPhone 5 4G-LTE services that operate at 1.8 gigahertz (GHz) instead of the official 2.6GHz spectrum band that was assigned by the Malaysian Communications and Multimedia Commission (MCMC) last year.

Analyst Cheow Ming Liang from the research division of Kenanga Investment Bank Bhd (Kenanga Research) was positive on this latest industry development given “the 1.8GHz spectrum could provide wider LTE coverage as well as better indoor signal strength.”

“We also do not discount that celcos could potentially review its LTE capex (capital expenditure) albeit the quan­tum may not be extensive given the 1.8GHz frequency requires three times less base stations as compared with the 2.6GHz band.”

Maxis had received consent to offer its 4G-LTE services via its two 25 megahertz blocks of the 1.8GHz spectrum, which is currently assigned for its 3G network.

The official 2.6GHz LTE spec­trum band was awarded by the MCMC to eight industry players in December 2012.

Both Celcom Axiata, a celco subsidiary of Axiata Group Bhd (Axiata), and DiGi.com Bhd (DiGi) had also bagged the same 1.8GHz spectrum band size as Maxis.

“Based on our industry source, Celcom Axiata has received a green light from the authority to deploy its 4G LTE under the 1.8GHz spectrum band while DiGi is still in the midst of processing the application.

“We understand that 4G LTE would allow subscribers to enjoy super-fast speed of up to 75 mega­bits per second (Mbps) with the typical average speeds of between 10Mbps to 30Mbps within the coverage areas,” Cheow stated in a sector update.

Advantages of 1.8GHz

Source: Bloomberg, Kenanga Research

The key differences between 2.6GHz versus 1.8GHz spectrum band for LTE are the former band is suitable for covering densely populated areas and handling large volumes while the latter could provide two times wider cov­erage (than the LTE 2.6GHz) and better indoor signal strength.

Cheow had illustrated in the report that LTE 1.8GHz enabled a 50 to 100 per cent increase in cell radius from that of a 2.4GHz cell, thus requiring fewer tower sites given the same area and ultimately rendering a lower total cost of ownership (TCO).

Aside from celcos leveraging on savings from lower TCO, subscribers would also benefit as the 1.8GHz platform’s lower fre­quency meant better in-building penetration and improved indoor coverage.

“With the authority now ap­proving celco operators to oper­ate their LTE services under the 1.8GHz frequency, which requires three times fewer base stations as compared to the 2.6GHz band, we believe that celco players could now potentially review their LTE capex going forward although the quantum may not be big.

“To recap, Celcom has allocated RM100 million (out of its RM1 billion capex allocation) to roll out its LTE services in FY13 while Maxis is expected to spend about 75 per cent of its targeted ‘slightly less than RM1 billion capex’ on its network services.

“DiGi, meanwhile, is target­ing a capex to sales ratio target of 11 per cent for 2013, which im­plies FY13 capex of about RM730 million,” Cheow elaborated.

LEVERAGING ON ADVANTAGES: Photo shows a technician working on a cellular tower. Aside from celcos leveraging on savings from lower TCO, subscribers will also benefit as the 1.8GHz platform’s lower frequency means better in-building penetration and improved indoor coverage. — Reuters photo

Fortifying the ecosystem

He added that the latest move to deploy 4G-LTE under the 1.8GHz frequency would no doubt further strengthen the local 4G ecosystem due to the big availability of handset devices for this spectrum.

Based on the global mobile suppliers association, there were 58 handset devices sup­ported LTE 1800 as compared with 49 in LTE 2600 as of early January 2013, he stated.

“Meanwhile, we also believe that celcos will pursue carrier aggregation (inter-band 1.8GHz plus 2.6GHz) to further increase its bandwidth and prepare for the upcoming data trend surge.

“This will ultimately benefit to the network backhaul provid­ers such as Telekom Malaysia Bhd and Time dotCom Bhd,” he noted.