Tower companies SBA Communications and American Tower both said that AT&T (NYSE: T) significantly slowed down its spending on its mobile network during the fourth quarter of 2014, and the carrier's spending remains somewhat sluggish compared with AT&T's network spending during the first half of last year.
"In the U.S. where we expect organic core growth of about 7%, we're forecasting commenced new business in 2015 to decline about 25% versus 2014 levels driven by a slowdown in spending at AT&T," Tom Bartlett, American Tower's CFO, said during the company's quarterly conference call with investors, according to a Seeking Alpha transcript of the event. "We've assumed that the other major carriers will be at least as active as they were in 2014, and if there is a reacceleration of AT&T spend there could potentially be some upside later in the year."
Executives from American Tower rival SBA noted a similar slowdown at AT&T.
"AT&T has slowed now, and they slowed down beginning in the fourth quarter," Jeffrey Stoops, SBA's CEO, said during that company's quarterly conference call, according to a Seeking Alpha transcript of the event. "I would agree, with the comments from one of our peers that echoed that, they continue to be off. They're doing things, for sure, but they're off the pace that they were in the first half of last year. And we'll see how that goes the rest of the year. But that slowdown was well known to us at the time we gave our prior guidance, and there's not much that has changed on that front."
AT&T confirmed that it is spending less on its mobile network now than compared with last year.
"Our 2013 and 2014 investment was higher as we invested to expand and enhance our wireless and wired networks. We invested $21.4 billion in 2014, including $4.4 billion in 4Q14," said AT&T spokesman Mark Siegel. "It would stand to reason now that we've expanded our 4G LTE network to cover more than 300 million people that our investment would level off, but we'll continue to invest in our networks. In fact, we've said we plan to invest in the $18 billion range in our existing businesses in 2015."
Executives from American Tower and SBA both noted that AT&T has a wide range of planned expenses, including its proposed $48.5 billion purchase of DirecTV (NASDAQ: DTV), its $18.2 billion purchase of AWS-3 spectrum licenses in the FCC's recent auction, and its plan to build out an LTE network in Mexico via its $1.875 billion acquisition of NII Holdings and its $2.5 billion purchase of Iusacell there.
Siegel declined to comment beyond his initial statement.
Indeed, if all of AT&T's planned purchases are ultimately approved, the carrier may well increase spending on its network. AT&T said it won AWS-3 spectrum licenses covering 96 percent of the U.S. population, and that it plans to begin deploying a network on that spectrum beginning in the 2017-2018 period. The carrier also plans to deploy LTE in Mexico.
"I think AT&T happens to have a lot of different uses for its cash today," Stoops said during SBA's call. "And I mean I take great comfort in the fact that they were the high bidder on the AWS-3 auction. That has to be deployed, has to be equipment put on towers to handle that type of new spectrum. So I mean we view this as very temporary."
"AT&T is still going to be active but is a comparison to last year," said Jim Taiclet, American Tower's CEO. "2014 was the most active year that we have seen from our perspective with AT&T since I've been at the company. It was an outsized, probably a record year for them for mobile spending. And this year 2015 is the more normalized year for AT&T and also still robust."
Taiclet added that Verizon (NYSE: VZ), T-Mobile US (NYSE:TMUS) and Sprint (NYSE: S) continue to spend on their respective networks. He said American Tower's current U.S. "application flow" ranks Verizon first, followed by T-Mobile, AT&T and then Sprint.
Analysts: AWS-3 auction helps AT&T catch up to Verizon in spectrum ownership in major markets
AT&T to nab Nextel Mexico for $1.88B from bankrupt NII Holdings
Verizon resilient in Q4 with 2M new postpaid subs