Verizon & AT&T Capex Increases Catch Some Analysts Off Guard

Wall Street analysts at some firms were surprised to find that both Verizon and AT&T's capital expenditures (Capex) spending rose well above expectations for Q1 2018. Verizon, for example, spent around $4.6 billion  - approximately 29-percent more than expected by the analysts at Deutsche Bank Markets Research. That's also around 50-percent more than was spent in 2017's first quarter. On the other hand, AT&T' figures came in at $6 billion. That's more than was expected by the firm by around 9-percent and an annual increase of 3-percent. However, each company was already expected to spend more this year than in previous years and the increases aren't inexplicable. The research firm primarily chalks up the increase as a response to tax reforms and bonus depreciation, as well as a means to address the compounding effects of unlimited data plans on a network. Beyond that, the increased spending is also thought to be attributable to an early start to the U.S. carriers' attempts to be first in offering a 5G network.

While AT&T's figures are certainly nothing to scoff at, Verizon's increase was particularly unexpected for the analysts. However, the company had planned to spend around $17 billion to $17.8 on network improvement and that figure hasn't moved. Bearing that in mind, the company has also affirmed that at least some of the spending has been centered toward rolling out the millimeter wave spectrum required for 5G. That has both tower companies and networking equipment providers excited about their prospects for growth this year. Equipment providers such as Nokia and Ericsson, for example, have reported that the increase in spending has had a positive impact on their own outlooks. It is expected that network providers will spend approximately $30 billion in Capex for 2018 - an increase of 14% annually. Sprint is also expected to make up a substantial portion of that, with the company making statements last year that it would increase spending - although it's impossible to know how the prospects of a merger with T-Mobile will affect that.

It's worth noting that any excitement surrounding prospects of increased network spending may be premature. Verizon has specifically stated that this isn't a deviation from what it had intended to spend for the year. Moreover, it's nothing at all like the increases in spending witnessed during the transition to 4G LTE from 3G. The next-generation networks aren't expected to begin arriving until sometime in 2019 or 202o at the earliest. So the increase in the coming years will likely be more dramatic.

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Daniel Golightly

Senior Staff Writer
Daniel has been writing for AndroidHeadlines since 2016. As a Senior Staff Writer for the site, Daniel specializes in reviewing a diverse range of technology products and covering topics related to Chrome OS and Chromebooks. Daniel holds a Bachelor’s Degree in Software Engineering and has a background in Writing and Graphics Design that drives his passion for Android, Google products, the science behind the technology, and the direction it's heading. Contact him at [email protected]
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