Where’s the beef? 2020 capex of major U.S. wireless carriers

Meanwhile, the big growth in capex is expected in China. (Getty Images)

This year promises to be the year that 5G buildouts really gain traction in the United States. So how much will operators be investing in capex in 2020? Capital expenditures include funds used by a company to acquire, upgrade and maintain physical assets such as wireless infrastructure. It can also include software and services.

Obviously, operators’ capex numbers are inclusive of more than just 5G build-outs. Also, their capex numbers don’t separate wireline from wireless expenditures. But it’s still interesting to look at their investment plans for the year.

AT&T is surprisingly spending less on capex in 2020 than it did in 2019.

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In 2019 AT&T’s gross capital investment was $23.7 billion. But for 2020, AT&T is projecting capex in the $20 billion range. This decrease of about $3 billion comes at a time when AT&T is building out its new 5G network. But the company is under pressure from activist investor Elliott Management to control spending. Instead of spending as much, or more, on capex in 2020 as it did in 2019, AT&T will instead buy back its own shares to increase the price for the benefit of shareholders.

Share buybacks are not included in capex, but they can affect how much money a company chooses to invest.

AT&T bought back 56 million shares last year, and AT&T CEO Randall Stephenson says the company will buy back about 100 million shares in the first quarter 2020.

Verizon

Verizon spent $17.9 billion on capex in 2019. The company said its 2019 capital spending was driven primarily by its fiber deployment in 60-plus markets, outside of its ILEC footprint, as well as investments in its 5G Ultra Wideband network. Verizon is planning to spend about the same in 2020. “We expect consolidated capital spending to be between $17 billion and $18 billion, including the expansion of our 5G network in new and existing markets; additional 4G densification to stay ahead of demand and our ongoing fiber build,” said Verizon CFO Matt Ellis on the company’s most recent earnings call in January. Ellis added that the timing of spending “will be higher earlier in the year than last year.”

Verizon has authority to repurchase up to 100 million of its own shares. But the company says it will commence buybacks only once it has satisfied its other capital priorities, including its capex investments of $17-18 billion and the possible purchase of spectrum.

Sprint, T-Mobile

Sprint spent $4.5 billion in capex in 2019 as it deployed 5G in nine markets during the year. But now that T-Mobile’s purchase of Sprint is mostly assured, Sprint’s capex spending will be merged with T-Mobile’s.

RELATED: T-Mobile and Sprint strike a final deal on price

At the time of its fourth quarter 2019 earnings call, T-Mobile was still waiting for word on its merger with Sprint. So T-Mobile did not include Sprint in its capex reporting. For 2019, T-Mobile spent between $5.8 billion to $6.1 billion on capex. And for 2020, it expects to spend just slightly more: $5.9 billion to $6.2 billion. T-Mobile’s CFO Braxton Carter said the carrier’s capex profile would be “heavily weighted to early in the year, similar to 2019.”

“Now that we have rolled out the extent of low band tops, we're shifting those dollars into 5G and continued rollout of the 600 MHz,” said Carter. “We believe that we've adequately designed this cash capex guidance as it's similar to last several years…we do believe we can accomplish everything we need to do with that guidance.”

T-Mobile has $7.5 billion remaining of a $9 billion share buyback authorization.

Dish

Dish Network is set to become the U.S.’s fourth largest facilities-based wireless provider. But it won’t be spending billions on wireless capex in 2020. The company still has a lot of groundwork to do, lining up vendors and securing permits. On its recent quarterly earnings call, Dish CFO Paul Orban said, “Our 2020 wireless expenditures are currently expected to be between $250 million and $500 million.”

RELATED: Dish Wireless won’t be a boon for tower companies in 2020

Wireless capex globally

Dell’Oro Group analyst Stefan Pongratz said, “We’re forecasting the RAN market which correlates fairly well with the wireless market.” He said Dell’Oro is expecting mid-single digit growth in North America for both wireless capex spending and RAN spending. “We are more optimistic about the mid-band and the mmWave outlook. We’re not as optimistic on the low-band capex.”

Meanwhile, the big growth in capex is expected in China. The analyst group Cowen is expecting strong global service provider capex spending in 2020, increasing 6% compared to 2019. This wireless growth will be “almost entirely driven by emerging markets and especially China,” writes Cowen. “Excluding China, the CY20 wireless outlook is for more modest ~ 2% Y/Y growth, essentially unchanged from calendar year 2019.”

Dell’Oro’s Pongratz said, “We’re very optimistic on China 5G in 2020.”

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