CAPEX at AT&T, Verizon to rise in 2018; AT&T investing in High Speed Networks

Capital expenditures (CAPEX) at AT&T and Verizon will rise slightly more than had been expected for 2018, according to Oppenheimer analysts. In a research note, analysts cited “5G” investments in upping their capex estimates for Verizon by 2%, and they raised their AT&T outlook by 3% because of FirstNet.

“For FY2018E we increase our total capex estimates [for Verizon] by 2% to $18.2B, due to wireless and our position that 5G deployments will accelerate,” the Oppenheimer analysts wrote in a report today. “We increase our FY2018E capex estimates [for AT&T] by ~3% to $25.0B due to FirstNet.”

According to Fierce Wireless, both Verizon and AT&T spent more on their networks in the first quarter of this year than some Wall Street analysts had expected.

“The biggest delta, or upside surprise vs. our estimates thus far has come from higher capex numbers at both Verizon and AT&T,” wrote the Wall Street analysts at Deutsche Bank Markets Research in a May report to investors, following the carriers’ first-quarter earnings reports. They pointed out that Verizon spent fully $4.6 billion on its network during the first quarter, which they said was 29% more than they had been expecting and almost 50% more than what Verizon spent on its network during the same quarter last year.

Overall, the nation’s top carriers are expected to significantly raise their capex spending this year in advance of 5G launches. Barclays in February said it expects capex among the “big four” (Verizon, AT&T, T-Mobile and Sprint) to rise by 10% this year, which it said would be the largest increase in the past five years.

Last week, AT&T executives told attendees at a Wells Fargo investor conference:

Many of the company’s capital-intensive projects are well under way or are near completion, which will support AT&T’s de-levering goals. The company now markets its 100% fiber network to 9 million locations, well on its way to the 12.5 million commitment it made as part of the DIRECTV acquisition. In fact, AT&T expects to reach 14 million customer locations by mid-2019. Also within the next year, the company expects to be in the 40% to 50% range of its FirstNet buildout commitment. And AT&T’s 4G LTE build in Mexico is nearly complete. AT&T also expects continuing benefits from its software defined network (SDN) investments.

High-speed networks. These networks must be able to deliver premium content to whatever screen the customer demands at the lowest cost per megabyte possible. This can include delivering content to homes, mobile devices and cars, and AT&T is investing in wireless build, fiber and new technologies like 5G to deliver a great viewing experience as demand continues to grow for 4K video and virtual and augmented reality.

AT&T Communications provides mobile, broadband, video and other communications services to U.S.-based consumers and nearly 3.5 million companies – from the smallest business to nearly all the Fortune 1000 – with highly secure, smart solutions. Revenues from these services totaled more than $150 billion in 2017.

AT&T expects:

  • Continued solid growth in its Mexico wireless operations in the second quarter of 2018 with as many as 700,000 net adds and improving churn. However, the strengthening U.S. dollar and volatility in foreign exchange rates are expected to pressure International segment results.
  • Wireless service revenue growth for full-year 2018, on a comparable basis. The company expects wireless service revenues will be essentially flat in the second quarter of 2018.
  • The transition of the video market to continue to negatively impact revenues and margins in the Entertainment Group. For the quarter, the company expects total video and broadband subscribers to increase, with DIRECTV NOW subscribers more than offsetting continued declines in traditional TV subscribers. Stephenson said that the mix will continue to shift to over-the-top video. Earlier today, the company announced new unlimited wireless plans — AT&T Unlimited &More Premium starting at $80 for the first line and AT&T Unlimited &More for $70 for one line or $40 per line for four lines— that include access to AT&T’s WatchTV service, the company’s newest video offering featuring 30+ live channels and more than 15,000 TV shows and movies on demand.Stephenson said the new product comes with attractive margins.

 

3 thoughts on “CAPEX at AT&T, Verizon to rise in 2018; AT&T investing in High Speed Networks

  1. Mixed Messages on Fixed 5G
    AT&T also highlighted fixed 5G service in South Bend, which is one of their four trial markets for fixed 5G service. In a company blog post, the carrier says residents in the fixed 5G trial are getting home broadband speeds of near 1 Gbps with latency rates of less than 20 milliseconds. Additional fixed 5G trial markets include Waco, Tex; Kalamazoo, Mich.; and Austin, Tex.

    AT&T is continuing these fixed 5G trials, but the company is not exactly openly embracing the concept of fixed 5G. At an investor conference last month, AT&T Senior EVP and CFO John Stephens didn’t exactly endorse fixed 5G as a viable option. Rather, he suggested AT&T may not be that interested in the technology.

    Speaking specifically about fixed 5G, Stephens said “In a general residential broadband solution, the economics for us don’t seem to work.” He pointed to the fiber investment needed for fixed 5G backhaul as a real hurdle to an acceptable fixed 5G business case.

    Perhaps AT&T is looking for some middle ground on this. Markets where they are already investing in fiber broadband may alleviate these cost concerns allowing them to layer fixed 5G access on those fiber networks. Such an approach could extend the reach of a ‘fiber broadband like’ experience in these markets to additional homes and businesses, without having to bring fiber all the way to every premises.

    Verizon on the other hand, appears to be taking a somewhat opposite and more aggressive fixed 5G approach. Verizon says they intend to offer fixed 5G to a market of about 30 million homes, most of which are outside of their incumbent Fios FTTP markets.

    http://www.telecompetitor.com/att-fiber-now-reaches-9-million-locations-fixed-5g-trials-also-underway/

  2. Thanks for that update on AT&T fixed broadband Wireless access plans. But how can any carrier justify calling it 5G when it’s based on a proprietary spec and proprietary technology?

  3. AT&T sells its data center assets to Brookfield for $1.1 billion:
    AT&T will sell its data center colocation operations and assets to Brookfield Infrastructure and its institutional partners for $1.1 billion. This includes 18 Internet Data Centers (IDCs) in the United States and 13 outside the United States.

    Brookfield is establishing a wholly-owned company to own and operate the assets. Customer contracts, employees supporting the colocation operations, fixed assets, leased and owned facilities will transfer to Brookfield. The colocation data center operations serve a diversified customer base of more than 1,000 companies.

    AT&T said it will continue to deliver network services to its customers at the IDCs. Funds from the sale will be used to pay down debt. AT&T will become an active sales channel for the Brookfield business and will be the anchor tenant of the colocation operations.

    Brookfied intends to appoint Tim Caulfield as CEO of the business. Caulfield is currently CEO of ANTARA Group, an IT management consultancy focused on the Internet-as-a-Service segment with extensive experience in data center services.

    AT&T noted that will continue to offer customers access to colocation services at more than 350 data centers — including transferred IDCs — around the world as part of AT&T’s colocation ecosystem program.

    https://www.convergedigest.com/2018/06/at-sells-data-centers-to-brookfield-for.html

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