The analysts at Oppenheimer raised their capex estimates for both AT&T and Verizon for 2018, noting that both carriers are spending slightly more on their network efforts than the analysts had initially expected.
The analysts also lowered their capex estimate for Sprint for the current quarter to just $1 billion, down from $1.5 billion, but the firm didn’t change its estimates for Sprint’s total 2018 capex spending. The firm’s analysts in a note to investors explained that they aren’t changing their full-year estimates for Sprint because “as management stated at a recent industry conference capex will be back-end loaded due to timing on its tri-band upgrades and macro footprint expansion.”
Nonetheless, it’s noteworthy that the Oppenheimer analysts raised their capex forecasts for Verizon and AT&T for the full year 2018 because both carriers are edging toward their promised 5G service launches later this year.
“For FY18E 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 FY18E capex estimates [for AT&T] by ~3% to $25.0B due to FirstNet.”
The increases are not necessarily a surprise. 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.