Capital costs for CDMAOne vs GSM:
I finally got around to trying to duplicate the analysis that Gregg hinted at some time ago. I compared the capital costs for a CDMAOne system vs those for a GSM system. This turns out to be somewhat hard to do for a variety of reasons (e.g. adding up capital costs, estimating pops, loading, terrain/population density, the fact that most US GSM providers are only part of some larger company and the costs are not completely separated.) So I had to make some approximations:
1) I compared Western Wireless (one of the few isolated GSM providers) to Sprint PCS.
2) Instead of adding up capital costs, I instead used capital depreciation as a proxy for the running total of capital costs.
3) Western Wireless does not provide an estimate of population covered, so I added up the metro area populations of their coverage areas. It comes to 11M, but that is probably too high since they undoubtedly are missing some of the suburbs. In contrast Sprint gives their coverage (117M people).
4) I ignored maintenance costs for the time being. Maybe I'll get to it later.
The result is that per person covered the Sprint depreciation was $1.37 per person covered per quarter ($160M / 117M people), and the WW depreciation was $1.91 per person covered per quarter ($21M / 11M). If instead the metric is users, not population covered, then the results are $91.4 per user per quarter for Sprint and $79 per user per quarter for WW. This last figure is at first glance worrisome, although not as much so as the first is to GSM. However, it needs to be remembered that GSM got a headstart on CDMAOne and thus has higher loading/penetration for a given infrastructure buildout. For instance, imagine we had looked at the depreciation per user in late 96. Sprint would have been infinite (zero users), but WW would be measurable although substantially higher than currently. Combined these metrics are definitely in CDMAOne's favor, but the uncertainty is enough that in order to really know for sure I would need to evaluate some other companies as well. If I had to guess(!) from this data alone, I would guess that the capital costs for CDMAOne are perhaps 25% less than for GSM. Any comments?
Clark |
