AT&T and Verizon far outspent every nonfinancial company in the U.S. in domestic capital expenditures last year, according to fresh data from the Progressive Policy Institute. But overall capex spending by carriers is still on the wane.
AT&T spent $18.7 billion in capex in 2015, according to PPI estimates, outpacing Verizon’s capex spending of $16.5 billion. Exxon Mobil placed a distant third, according to PPI, spending $11 billion in capex.
Interestingly, neither T-Mobile nor Sprint ranked among the 25 biggest spenders in capital expenditures last year, according to PPI.
“AT&T and Verizon invested large sums to maintain and expand their networks again this year,” Michelle Di Ionno and Michael Mandel wrote in a 16-page report from PPI. “AT&T’s capital expenditure was down by 11.6 percent as compared to the previous year. Verizon boosted domestic capital expenditures in its wireless operations in 2015 in order to increase the capacity of its LTE network. However, this rise in investment was largely offset by a decrease in their wireline segment capital spending, resulting in a net increase of only 3.4 percent as compared to 2014."
And the nation’s two largest mobile network operators have continued to tighten their purse strings in 2016, PPI said. AT&T’s capex spending in the first half of 2016 was down 16.7 percent from the first half of 2014, according to PPI, and Verizon’s is down 14.4 percent from the same period two years prior.
Several factors appear to be weighing down wireless capex investments. Carriers have largely built out their LTE networks and have yet to commercially deploy 5G services, so timing may be a consideration. Also, the U.S. wireless market has grown increasingly competitive as smartphone penetration rates have plateaued, prompting operators to tighten their belts. And AT&T, Verizon and T-Mobile are all expected to spend billions on 600 MHz airwaves in the FCC’s ongoing incentive auction of TV broadcasters’ spectrum.
But PPI said fear of increased regulatory activity in the wireless market may also be causing on drag on capex.
“And, while it’s far too soon to draw a direct connection between regulatory changes by the FCC and spending by the telecom industry, it seems possible that the prospect of continued regulatory upheavals – including the potential for rate regulation – is influencing capital investment in the U.S.,” the authors wrote. “Still, capital spending trends are best judged over longer periods.”
- read this PPI report
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