U.S. wireless carriers in ‘5th or 6th inning’ of LTE deployments, American Tower CEO says

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U.S. wireless carriers continue to spend billions of dollars expanding and strengthening their LTE networks, according to carrier executives and those in the U.S. wireless tower industry. Indeed, James D. Taiclet Jr., CEO of tower giant American Tower Corp., said that “we believe that the U.S. is still probably in the fifth or sixth inning of 4G deployments. And that further 4G equipment installations will still be largely on macro towers.”

Taiclet’s comments are noteworthy in that they reflect expectations among tower executives and others that U.S. wireless operators like AT&T, Verizon and T-Mobile will continue to spend money to improve and expand their networks. AT&T, Verizon, Sprint and T-Mobile each claim to cover roughly 300 million Americans with their respective LTE networks, but continue to work to improve the coverage and capacity available within those networks, via either densifying their networks with more macro cell towers or through other methods like small cell deployments.

“Over the past 5 years the U.S. government has auctioned or otherwise made available close to 300 megahertz of new spectrum. We expect incremental spectrum assets like AWS-3 and the WCS bands, as well as the 700 megahertz spectrum that's been committed for the forthcoming public safety build-out, to be employed over the next several years,” Taiclet said in during American Tower’s quarterly conference call with investors, according to a Seeking Alpha transcript of his remarks. “As in the past, to fully capitalize on the availability of this spectrum we anticipate that new antennas and radios will be placed on our towers, which should continue to help support healthy levels of growth for us in the U.S. We also expect the vast majority of these deployments in the near to medium term will take place on 4G macro tower networks, particularly given that the 5G standard isn't expected to be formalized until 2019.”

Added Taiclet: “Looking forward, we expect that improved devices, greater 4G penetration, more and better applications, and consumers' behavior will continue to drive mobile data usage at a 30% to 40% annual growth rate.”

Overall, though, comments from U.S. wireless carriers offered a mixed view of network capex.

“We're still spending around $17.2 billion this year in capex,” said Verizon CFO Fran Shammo during that carrier’s quarterly conference call with investors, according to a Seeking Alpha transcript of the event. Shammo added that Verizon continues to spend money to improve the performance of its network in order to meet users’ rising demand for data. “We see that continuing to increase. So we're really preparing for two years out from where our usage is today.”

T-Mobile too reiterated its plans to continue to spend money on its network. T-Mobile CFO Braxton Carter also said that the carrier will continue to spend money improving its network, and that investors should not expect “any slowdown to our overall capital intensity,” according to a Seeking Alpha transcript of his comments during the carrier’s quarterly conference call.

Sprint executives, however, indicated the carrier could spend even less on capex than its already lowered guidance for 2016. Specifically, Sprint said it would spend “less than $3 billion” on capex this year, less than the $3 billion target Sprint initially set.

Finally, AT&T didn’t specifically address capex questions during its quarterly conference call; instead, the carrier spent its time with investors discussing its intended purchase of Time Warner. But the analysts at TBR research said they expect AT&T’s purchase of Time Warner will drag down the carrier’s network spending. “TBR believes AT&T would reduce capex in 2017 from 2016 levels, and keep capex suppressed over the next few years to stabilize its finances post-acquisition and bring its net debt to adjusted EBITDA ratio back to historical levels. Cutting capex could imply reduction in scope of key initiatives, such as LTE densification and fiber deployment, areas that are critical to staying competitive,” noted Chris Antlitz, senior analyst of TBR, in a statement.

Others took a different view on AT&T’s capex plans. After spending $170B on DTV/TWX, AT&T (along with the entire industry) has to invest in its network to make sure the mobile video experience is in fact a good one,” wrote the analysts at UBS following AT&T’s announcement of its plans to acquire Time Warner.

Finally, BTIG’s Walt Piecyk pointed out that Sprint’s capex remains far below those of its peers. He tweeted that Verizon’s wireless capex for the third quarter reached $2.8 billion, or $24 per subscriber, while T-Mobile’s wireless capex during the third quarter clocked in at $1.2 billion, or roughly $22 per subscriber. Sprint, on the other hand, spend $358 million on wireless capex, or just $8 per subscriber.

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