Analysts: AT&T, T-Mobile likely to spend more on capex in Q3

As expected, analysts at Wells Fargo Securities say all four nationwide U.S. wireless carriers ramped up capital spending in the second quarter after a dismal first quarter, and they expect AT&T (NYSE: T) and T-Mobile US (NYSE:TMUS) to spend more in the third quarter than they did in the second.

Analysts Jennifer Fritzsche, Eric Luebchow and Caleb Stein said they weren't surprised to see the carriers increase their capital intensity in the second quarter, as their checks with the tower companies suggested that acceleration was coming. Verizon (NYSE: VZ) had the biggest jump in capex in the quarter, from $2.4 billion in the first quarter to $3.1 billion in the second quarter as it continues to densify its network with a combination of small cells and distributed antenna systems (DAS), the analysts said in a research note.

The analysts estimate that AT&T will spend $2.5 billion in the third quarter versus the $2.1 billion it spent in the second quarter, and that T-Mobile will spend $1.2 billion in the third quarter versus the $1.1 billion it spent in the second quarter. Sprint (NYSE: S) and Verizon, however, are likely to spend less in the third quarter than the second quarter. According to their estimates, Sprint will spend $1.5 billion in the third quarter compared with the $1.6 billion it spent in the second quarter, and Verizon will spend $2.9 billion in the third quarter compared with the $3.1 billion it spent in the second quarter.

For the full year 2015, the four carriers in aggregate are expected to spend $31.7 billion, and for 2016 the estimate is $30.6 billion. Here's the breakdown: AT&T is expected to spend $9.5 billion on wireless in 2015; Sprint will spend an estimated $6 billion; T-Mobile will spend more than $4.6 billion; and Verizon will spend on the order of $11.3 billion, according to the estimates.

In an earlier research note, Evercore ISI research analyst Jonathan Schildkraut and associate Justin Ages pegged AT&T's wireless capex on the order of $10.4 billion in 2015, with roughly 58 percent of AT&T's total capex for 2015 going toward wireless.

Analysts expect a lot of operators to roll out more carrier aggregation technologies this year, and T-Mobile is rapidly moving to get 300 million POPs covered with LTE by year-end. Sprint is focused on improving its network through more widespread deployment of its 2.5 GHz spectrum for TD-LTE services as well as carrier aggregation.

In a recent blog post, Sprint CTO John Saw said a key strategy for improving Sprint's network is to densify and increase the number of cell sites across its 2.5 GHz, 1.9 GHz and 800 MHz spectrum bands. That will include adding thousands of new macro sites to expand coverage, and it will include a continued expansion of its 2.5 GHz LTE footprint. Along with carrier aggregation and beamforming, it will use big data and network diagnostics to determine the optimal deployment of each small cell down to the street corner level.

Related articles:
Sprint's Saw: Our network densification won't be 'a traditional slow and expensive build'
Verizon, Sprint, others turn to carrier aggregation, small cells for remainder of 2015 capex
As the (wireless) world turns, operators and vendors adjust to SDN, NFV
Analysts: Verizon could run out of network capacity in 2-3 years

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