Q1 Earnings show Wireless Carriers Not Slowing Capex Spending

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Many analysts believed that capex spending in the first quarter of the year would decrease, with the incentive auction happening this year. But with three out of the four major carriers (AT&T, Verizon and T-Mobile) having reported their earnings for the quarter already. It looks like these analysts were wrong. With the carriers spending about the same as they normally would, or even more.

Verizon capex did decline to $2.2 billion. However, Verizon's CFO states that the decline is actually due to them spending more in Q4 in getting ready for the Super Bowl in February in the Bay Area. AT&T reported a total capex of $4.7 billion, which was a 17.6% increase year over year. But slightly down from the fourth quarter of 2015. T-Mobile on the other hand reported $1.3 billion for capex, which is a bit more than what analysts predicted, which was $1.1 billion for the quarter. T-Mobile stated that they are spending more now, so they can leverage the spectrum in this auction as soon as possible.

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While the carriers are still spending left and right on their network, it doesn't mean they aren't going to throw down a ton of cash at the auction in a few months. The incentive auction for the 600MHz spectrum is very important. You see this spectrum is like the holy grail. Since it's below 1GHz, it's going to help networks penetrate buildings and also spread out their coverage more without needing to lease more towers. This is definitely a good thing for T-Mobile, especially where they have the least amount of sub-1GHz spectrum as of right now. This auction is going to be a pretty big deal for the movement of 5G as well. Because with better coverage, means it can handle more devices and more users.

The auction has started, but it's not officially started for the carriers. You see, the broadcasters must first put their spectrum up for auction with the FCC, and then the FCC will be able to auction it off to the carriers and about 100 other applicants that are looking to take part in this auction later this year. The FCC says that the spectrum likely won't be put to use until around 2020, though.