As has been the case for much of 2015, Verizon Wireless (NYSE: VZ) and T-Mobile US (NYSE:TMUS) led the way in terms of capital expenditures for wireless network gear in the third quarter, with AT&T Mobility (NYSE: T) and Sprint (NYSE: S) appearing to be hanging back in terms of major capex spending. However, Sprint is just beginning its network densification efforts and some tower companies do expect AT&T to begin ramping up spending next year.
Verizon Communications CFO Fran Shammo noted last month on the carrier's third-quarter earnings conference call that capital expenditures were $4.4 billion in the quarter and $12.5 billion year-to-date. He said the company expects capital expenditures for 2015 to be within its stated range of $17.5 billion to $18 billion. Verizon has continued to deploy small cells, distributed antenna systems (DAS) and other in-building solutions to add capacity to its network, especially in urban markets, as LTE data traffic jumped 75 percent from a year ago.
"Our densification program is progressing well and it is achieving the capacity gains that we expected on the spectrum that is in service," Shammo said, according to a Seeking Alpha transcript. "For example in Chicago, we are on our plan for small cell deployments covering key locations with distributed antenna systems and expanding our in-building coverage."
T-Mobile CFO Braxton Carter said on his company's earnings call that the company is maintaining its cash capex guidance for 2015 of $4.4 billion to $4.7 billion. He noted that T-Mobile has "already rolled out the vast majority of the spectrum that we owned all within the CapEx parameters that we disclosed and reiterated our guidance for the third time. Because essentially the vast majority is overlaying the existing network."
According to a Seeking Alpha transcript, he noted that T-Mobile is expanding into new geographies with its 700 MHz A Block spectrum but that is also fully included in the guidance.
T-Mobile has 700 MHz A Block spectrum covering 190 million POPs and is in the process of closing deals to add another 20 million. So far, the carrier has deployed the 700 MHz spectrum to 175 million POPs. T-Mobile CTO Neville Ray said the "lion's share" of the new 20 million POPs is unencumbered from interference concerns, so "you can anticipate it will be rolled out at very fast pace as we have demonstrated this last year. The non-incumbency allows us to very rapidly hang the equipment we need on tenants on base station gear onto existing steel that's the model that we utilize which is very, very capex efficient as you have seen through 2013, 2014 and now 2015."
American Tower CEO Jim Taiclet said on his earnings conference call that "our largest new business customers over the last couple of quarters have been Verizon and T-Mobile, sort of running neck and neck in a way the last six months I'd say. And T-Mobile in the field we see them deploying aggressively their 700 MHz A Block spectrum. That's going to give them a stronger signal in places they don't have it. They're also doing a roaming overbuild, which continues. Because of the success of their subscriber additions, they can actually make the decisions to put network equipment in place in more territories across the United States, and they're doing that. So T-Mobile is being pretty aggressive this year."
Verizon has been "pretty stable and steady," he said. "Their wireless capex is up almost 20% year-to-date from 2014. They guided I think to $8.6 billion for mobile spending for capex in 2015. They're aggressively deploying AWS spectrum across their markets to handle the data demand that they're seeing from their customer base."
Taiclet said AT&T "continues to be grooming I guess we'd call it. They were our biggest customer for new business from late 2013 to mid-2014. And they've taken the intervening year or so to groom that investment and make sure that it's effectively being utilized for its subscriber base. They're guiding, as everybody I think knows, a little bit less from year to year capex spending, they're at $6.6 billion." He added that American Tower does "expect AT&T to continue to be competitive over the next few years on a network side of the business," especially as it starts to deploy its nationwide AWS-3 spectrum, which should pick up in earnest in 2017. AT&T CFO John Stephens said that capital expenditures totaled $5.3 billion in the third quarter, about the same as the year-ago period.
SBA Communications CEO Jeffrey Stoops noted on his call that "AT&T increased their contribution to our leasing results for the second consecutive quarter, and early indications are that we will see continued increases in leasing levels with AT&T in 2016. Domestic applications are growing, although in terms of signed domestic business year-to-date, we are behind our expectations of a year ago."
Meanwhile, Sprint's network densification project, which the carrier has dubbed the "Next Generation Network," is intended to increase coverage and capacity across the network. Sprint CEO Marcelo Claure has said that "nearly all" of Sprint's existing macro cell sites will be upgraded to support 800 MHz, 1900 MHz and 2.5 GHz for LTE. Sprint also intends to deploy thousands of new macro cell sites and tens of thousands of small cells.
"We're also excited about the early progress on the densification plans to further differentiate our network in the future. Most of the activity today has been on activities for our small cell deployments and we're very pleased with the early progress," Sprint CEO Marcelo Claure said on the company's earnings conference call. "We continue to be extremely surgical to maximize network performance as well as the efficiency of capital and operating costs.
Sprint continues to expect cash capital expenditures to be around $5 billion for fiscal year 2015, which ends at the end of Mach 2016, excluding the capex associated with purchasing leased devices in indirect channels.
Taiclet noted that Sprint is "still in the midst of finalizing their network strategy and once they do that, we'll hear more from them on exactly how they want to go through with that deployment. And again, they're going to be putting in spectrum bands for essentially 4G that are going to be much, much higher frequency than some they're already using today and eventually that bodes for a denser network even for Sprint when they're ready to make those investments."
However, Stoops noted that "activity levels with Sprint remained very low. They publicly discussed increased investment in their network as early as next year and we're excited about the prospects of what that could contribute to our growth." However, Stoops added that "given a lack of clarity around the scope and timing of Sprint's network investment, we've included very little incremental contribution from them in our initial 2016 outlook. We'll obviously continue to monitor their network plans closely."
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