Sprint lowers capex guidance again, promises small cells will make up for it

Image: Sprint

Sprint lowered its expectations for full-year cash capex yet again in its earnings call Tuesday morning, but the telco insisted that increased momentum in small cell deployments will offset that trend come 2017.

Representatives from Sprint announced that the third quarter saw $470 million in capex, little enough to move the expected full year capex from $3 billion to “less than $3 billion.” That change will no doubt renew concerns that the company isn't investing enough in its network to match the competition.

RELATED: Sprint’s shrinking spending drags U.S. wireless capex down 10% in Q2


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Indeed, a research note from Barclay's suggested this would be a major question facing the carrier going forward.

“Expectations for full-year capex to come in below $3Bn will likely keep questions around given overhanging concerns on whether its 'more for less' network improvement strategy is the right one." Barclays analysts wrote in the research note.

It doesn't help that this has become a pattern for Sprint. Back in May, the telco lowered its capex guidance from $4.5 billion to $3 billion – an expectation it has now broken.

On Sprint's end, representatives from the company argued that Sprint's unique position allows it to remain network-competitive even with the lowered capex.

“Sprint is uniquely positioned to operate at a lower capital intensity as a result of our tri-band LTE network foundation and our deep spectrum position,” said Tarek A. Robbiati, Sprint's chief financial officer, in the earnings call, according to a Seeking Alpha transcript. “In the prior years, we have, as Sprint, invested more CapEx per user than many other carriers in the United States. So we're reaping the benefits of that prior historic investment.”

Furthermore, Robbiati noted that the company is seeing its permits for small cells almost double, possibly indicating the company has overcome a sticking point in that process. As small cell deployments increase, the capex number should return to normal, the company said.

RELATED: Sprint's Claure: Spectrum is key to our small cell strategy

“As the permits come in, and we are pleased with the progress that has been accomplished so far, our CapEx will ramp-up in the second half of fiscal year 2016. The roll-out of our network will probably be accelerating in fiscal year 2017,” Robbiati said. “It's too early to guide you on CapEx on fiscal year 2017, but suffice it to say that you can expect an acceleration of CapEx spend on fiscal year 2017 relative to fiscal year 2016.”

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