VelaTel’s “Spectrum Arbitrage” Bet Pays off HUGE for VELA Shareholders
As NBT and VelaTel (VELA) have expected this for some time, VELA's 4G TD-LTE wireless technology partner ZTE made it official today: ZTE is going to be shipping very high power 3.5 GHz 4G-LTE Base Stations to wireless carriers including VelaTel in the near future (Q3 we are told by ZTE sources).
As per VelaTel CEO George Alvarez "TD-LTE in 2.5GHz and 3.5GHz spectrum via our relationship with ZTE, China Mobile and the GTI Forum has been the focus of this company for the past 2 years. We are pleased that our decision to partner with ZTE and GTI has established a solid foundation for our growth and eliminated the negative consequences of having to replace equipment in our existing networks."
We cannot overstate the importance and value creation of this technological breakthrough for VelaTel and VELA shareholders: adding full 4G TD-LTE technology to the 3.5 GHz spectrum band turns this second class "unpaired" TD spectrum into FULLY operational 4G spectrum ala 2.5 GHz spectrum that, until today, has been the primary spectrum domain of 4G TD-LTE base station technology.
Let's be clear: TODAY in VelaTel's Balkan operations the equipment ordered is still dual band Wi-Max with a fixed upgrade path to TD-LTE on their 3.5 GHz spectrum assets. It will not be until the 3rd quarter of 2012 at LEAST that pure TD-LTE base stations are readily available. In the case of the VELA networks in Croatia, Serbia and Montenegro the installed base subscribers are currently on Wi-Max NOT 4G-LTE...so we should expect a migration to 4G-LTE starting in 2013 as new dual band equipment (upgradable via firmware change to 4G TD-LTE) is installed and then upgraded to 4G TD-LTE.
And let's also be clear that with a 2.5 GHz spectrum being auctioned in some countries for $billions, 3.5 GHz spectrum has been sold for $millions because nobody thought 4G-LTE devices would work seamlessly on 3.5 GHz spectrum. 2.5 GHz spectrum was the "beachfront property" of wireless spectrum...3.5 GHz was the orphan junkyard.
Today's announcement by ZTE is a BIG game changer for value of VelaTel's 3.5 GHz spectrum assets in our opinion and the (eventual) 4G-LTE networks they are building ON that spectrum. As we have pointed out from the beginning of the partnership of ZTE and multi-national 4G carrier VelaTel (VELA), VELA has been scooping up HEAVILY discounted 3.5 GHz spectrum at 90-100X LOWER valuations than 2.5 GHz spectrum because there was no 4G-LTE base station equipment for 3.5 GHz ---YET. Without 4G-LTE technology, 3.5 GHz spectrum allocated years ago was limited to the now orphaned Wi-Max technology...and sold for substantially LOWER prices than 2.5GHz spectrum as it looked to be limited to wireless backhaul on an orphaned wireless technology.
Now, with its extremely low cost 3.5 GHz spectrum, VELA has really won the 4G LTE lottery. They have the VERY lowest cost spectrum and the base station equipment and the HIGHEST efficiency/lowest cost 4G LTE network deployment costs (TD-LTE is about 25% MORE efficient user of bandwidth than FD-LTE according to most technology experts).
For the past two years, VELA has made a calculated bet on their technology partner ZTE bringing the TD-LTE goods to 3.5 GHz spectrum. VELA was HIGHLY confident that ZTE would bring their 2.5 GHz LTE technology to the 3.5 GHz spectrum by 2012....so they took the risk and acquired via joint ventures 3.5 GHz spectrum in China/Peru/East Europe at BASEMENT prices vs. 2.5 GHz spectrum licenses selling for (in many cases) $billions.
Fast forward to today. Adding 3.5 GHz spectrum to the 4G TD-LTE family means that ANYONE with a 4G phone or dongle or SIM card/tablet/Mi-Fi card will IN THE NEAR FUTURE be able to use most any 4G LTE network worldwide... whether they run on 1.8, 2.5, OR 3.5 GHz spectrum frequency. A few spectrum bands will NOT be supported everywhere...but the vast majority of 4G-LTE users by 2015 will have their 4G-LTE device supported almost anywhere.
As NBT understands the technology today, as long as you have a device that has the latest LTE chips and software defined frequency control...very soon most next generation 4G-LTE devices (TD-LTE or FD-LTE protocol) will be SPECTRUM and protocol AGNOSTIC. Digital devices have a half-life of about 9 months...so this conversion to 4G-LTE is coming quickly in Vela's emerging markets.
By 2015, NBT and ZTE are confident either TD-LTE or FD-LTE protocol devices will work on at least all the PRIMARY most widely used 4g-LTE spectrum bands: 800 MHz/2.5 GHz/3.5 GHz. TD or FD. This ONE WORLD/ONE DEVICE vision has been the vision of TD-LTE developer China Mobile and its TD-LTE evangelizing organization the GTI Forum for YEARS.
NOW with ZTE making this breakthrough for TD-LTE into 3.5 GHz ALL equipment vendors are MUCH closer to bringing the holy grail of 4G-LTE to wireless customers: spectrum agnostic base stations and devices that work anywhere in the world.
In short...in our opinion bringing true 4G LTE to the 3.5 GHz spectrum frequency makes VELA's 3.5 GHz spectrum assets 20-to 100 times MORE valuable in some cases. It also means that in the foreseeable future ALL handsets/dongles/base stations/Mi-Fi with software defined radio frequency chips will be able to move from 800 MHz/1.8 GHz/2.5 to 3.5 GHz networks seamlessly no matter the protocol (i.e. Time Division Duplex (TDD) vs. Frequency Division Duplex (FDD)
What this ONE 4G-LTE ALL DEVICE/ALL NETWORKS/ALL PROTOCOLS compatible world really means is eventually MUCH higher roaming revenues for the VelaTel 4G LTE networks.
HUGE roaming revenues come to VELA networks in China/Peru/East Europe from a mostly ONE 4G Device/One World Network. MUCH lower priced 4G LTE digital devices for VelaTel in the near future will result as well, the more networks a device works on, the lower the price because the higher the manufacturing volume/demand.
As the LOWEST cost carrier in their markets, in a one device/all networks world, we expect VELA to capture a large share of roaming data traffic.
VelaTel's CEO George Alvarez has personally told me for years that THIS day would come...if ONLY he could give me the date. Well the date is here George—and for the much suffering VelaTel shareholders it could NOT have come at a better time.
With 3.5 GHz TD-LTE available in late 2012 to VelaTel, our belief is they will HAVE to raise their pro-forma forecasts for their networks. This breakthrough literally is a game changer for those who own 3.5 GHz spectrum around the world.
Congratulations to VelaTel!
PRESS RELEASE: ZTE Corporation ("ZTE") (H share stock code: 0763.HK / A share stock code: 000063.SZ), a leading global provider of telecommunications equipment and network solutions, today released the world's first 3.5 GHz high-power TD-LTE distributed base station. The base station has wide coverage and transmission power of 80W. In addition, its RF module supports a 4-port antenna, with each port capable of transmission power of 20W. The base station also has interference suppression and carrier aggregation features. This increases site coverage by more than 25 per cent, dramatically reducing operator network development costs.
P.S. This bet on 4G-LTE coming to 3.5 GHz WAS a bet the company move...and its now paid off...We will include a LOT of additional data on this breakthrough for VELA and ZTE in our upcoming report...we have been WAITING for this announcement from ZTE as part of the information embargoed under our NDA with VELA.
Disclosure: NBT officers and affiliates own/control @10 million shares of VELA
About the Author
Founder and Editor-in-Chief NBTEquitiesResearch.com. Contributor and Anchor Fox News Channel and Fox Business Network. Chairman & CEO NBT Group,Inc., a boutique private capital investment bank and investor relations organization.
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