CellTower

Carriers Cutting back on Tower Spending, Ahead of 5G Deployment

March 4, 2016 - Written By Alexander Maxham

There are two big expenses right around the corner for the wireless carriers in the US. In the immediate future, there’s the incentive auction for the 600MHz spectrum, which actually takes place later this month. Analysts are expecting the auction to raise around $60 billion. The other is 5G. While AT&T and Verizon have already started working on commercializing 5G, it’s still quite a ways out from being available to everyone. However, both the incentive auction and 5G is going to take a ton of money from these carriers, and now they are all looking at cutting back a bit, when it comes to spending on their network.

In fact, today analysts at Wells Fargo Securities downgraded the tower sector. They stated that carriers are looking to downsize a bit and spend less on towers. Wells Fargo Securities wrote “…we believe the industry is facing some growing pains right now in the US”. They do believe that the “growing pains” will pass, they also mentioned that the guidance from these tower companies do reflect these growing pains that we are seeing. However, the analysts do not think that the stocks will outperform the growing pains. They believe that growing pains will continue until the “spectrum auctions, FirstNet and 5G decisions and standards get sorted out.”

AT&T is a “top 2 customer for every tower company” has been cutting back on spending on their wireless network. Since they are investing in fiber these days. The other three carriers – T-Mobile, Sprint and Verizon – have also cut back on their infrastructure budgets. So they can maximize margins and prepare for the auctions. Wells Fargo Securities analysts did also mention that this is all pretty familiar territory. As carriers typically look to cut back on spending on their infrastructure before a big change in networks come. The same thing happened in the transition from 2G to 3G and 3G to 4G. However, once these carriers begin building out 5G, the tower industry will see things return to normal and profits will likely skyrocket. Due to all of the different technologies that carriers are going to be using in their 5G networks.