Recent reports have suggested that AT&T’s wireless capital expenditures for 2015 will be significantly lower than 2014 levels. This will undoubtedly disappoint shareholders, as strong spending is generally seen as a positive driver of growth. A reduction in capital expenditures of over twenty percent is a drastic cut, and far greater than analysts had predicted for the operating year. The wireless expenditures for this year are projected to be roughly 9 billion dollars. This number represents the wireless capital expenditures, and doesn’t include expenses, or maintenance for other AT&T products and services. One factor which may have affected the reduced spending was AT&T’s acquisition of DirecTV earlier this year. This reduction also appears far greater because of increased spending in the 2013 and 2014 operating years. AT&T had already projected a reduction in capital expenditures for the 2015 operating year, though wasn’t specific on how they would be decreased.
Capex or capital expenditures, refers to the money spent on buildings, hardware, and other important assets owned by a company, whether it be buying new equipment, or overhauling older equipment. In the wireless industry, it includes such things as cellular towers, and the needed infrastructure to support cellular devices. John Stephens, the CFO (Chief Financial Officer) for AT&T, explained the reasons for the decline at the Morgan Stanley European Technology, Media & Telecom Conference, explaining that AT&T already has a large number of “macro towers”, which are commonly referred to as cell towers. These are the large towers usually linked to the cellular networks. Stephens argues that that need for AT&T to deploy towers has decreased, and that the most important needs for now are with spectrum, or the frequencies by which cellular devices work.
The wireless industry is increasingly competitive, particularly in the holiday season. As other carriers are increasing or maintaining spending levels, AT&T is set to decrease theirs. However, AT&T is still a strong competitor in the industry, and is participating in the upcoming 600Mhz auction. With this critical low-band spectrum, the signal spreads to far greater distances, albeit at lowered speeds. They’ll be bidding against other carriers, including Verizon, and T-Mobile US, along with others. The Texas-based company operates the second-largest cellular network in the United States, behind Verizon Wireless.