pdvWireless Needs $100M to $150M More Funding for 900 MHz Relocation
Tuesday, June 04, 2019 | Comments
pdvWireless CEO Morgan O’Brien told potential investors May 21 the company needs an additional $100 million to $150 million to carry out its 900 MHz realignment plan and offer broadband services in the spectrum. The company had $77 million cash on hand March 31.

The company, which is waiting for final rules from the FCC on realigning the 900 MHz spectrum largely following recommendations in a 2014 pdvWireless petition for rulemaking, expects negative cash flow of about $30 million per year for the next two to three years. Most of the money will be used to reimburse incumbent 900 MHz narrowband licenses to move to other 900 MHz spectrum and retune their systems. The narrowband shift will free up a swatch of 900 MHz broadband spectrum for pdvWireless to offer long-term broadband spectrum leases and services.

O’Brien compared the 900 MHz retuning process to the 800 MHz rebanding process that was supposed to be done in three years but is still ongoing, more than 14 years after it began in 2005. He estimated the total cost to retune all the narrowband licenses in the 900 MHz band to be from $90 million to $120 million during three years.

“No company has greater expertise in the retuning process than PDV,” O’Brien said. “We’ve cleared contiguous 800 MHz spectrum and retuned the 800 MHz public-safety band. It’s (900 MHz realignment) a vastly smaller effort than the Nextel 800 MHz effort.”

O’Brien said only 400 systems at 900 MHz need to be touched, predicting that only in rare instances will equipment need to be replaced — most systems can be retuned. He said 60 of the 400 narrowband systems are large multisite networks, 120 are medium-sized networks, and 220 are small, single-site systems.

O’Brien used two example markets, Minneapolis and Chicago, during his “pdvWireless 2019 Investor Day” presentation. Minneapolis would be an easy market to retune with 240 channels and only three licensees — railroads, TAMO and GM Research — that need to be retuned. Chicago would be difficult with six of the largest 900 MHz licensees. Edison/Excelon holds 24 licenses in the band, along with 13 each for Communications Unlimited and ESP, Ford Motor with 12 channels, UPS with seven and Northern Indiana Public Service Company (NIPSCO) with four. pdvWireless owns 91 900 MHz channels outside the broadband allocation in the Chicago market.

Following the three-year 900 MHz retuning process, pdvWireless expects high earnings before interest, taxes, depreciation and amortization (EBITDA) margins and a run rate approaching 80% by fiscal year (FY) 2024. The company is projecting a $125 million to $150 million annual run rate by year five or FY 2024 and $250 million to $500 million annual run rate by 2029.

The upcoming year will be a big one for pdvWireless, which hopes to see a final report and order from the FCC on the 900 MHz realignment, which would allow the company to begin executing its retuning plan, explore options to fund its business and sign at least one commercial agreement. O’Brien said pdvWireless’ business model is capital efficient similar to a public operator because the electric utilities that the company is targeting are motivated to sign leases with pdvWireless and invest in broadband services.

Earlier this year, O’Brien, said although the company’s original plan of becoming a commercial broadband carrier focused on the critical infrastructure industries (CII) market still stands, the company plans to lease its 900 MHz spectrum to investor-owned utilities (IOUs) that prefer private networks and can raise capital to deploy the technology. pdvWireless’ target market is now IOUs because they have high credit ratings and strong balance sheets. The utilities serve a population of 220 million and generated $260 billion in revenue in 2016. Offering 20-year leases is less capital intensive than becoming a CII carrier, O’Brien said. The company is conducting a private Long Term Evolution (LTE) pilot with Ameren for a single field area network for distributed generation, transmission automation, distributed substations, pole-top sensors, gas operations, feeder pole field force and location metering. The pilot combined 17 legacy analog networks into a private LTE network. Earlier this year, pdvWireless announced the Utility Broadband Alliance (UBBA), a group that aims to advance the development and adoption of dedicated private broadband networks for utilities. The alliance has increased its members to 19 from the founding 13 companies, with Tait Communications among the new members.

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