October 28, 2014 — In the third quarter, wireless capex at Verizon Communications was $2.5 billion, even with last year’s third quarter, and through the first nine months of 2014 it totaled $7.8 billion, compared with $6.7 billion in 2013.
“Our deployment of capital in wireless has been very consistent throughout the first three quarters of this year,” said Fran Shammo, Verizon chief financial officer. “This year we had a much more flatness to our capex spending. So if you looked at prior year we always had more of a ramp into the back half of the year. You won’t see that this year; so it has become more level.”
Verizon has been deploying AWS spectrum across its footprint and currently has more than 400 markets with AWS, or XLTE, as it is branded.
“We are deploying capital to proactively stay ahead of demand, and our capital investments continue to focus on adding capacity to optimize our 4G LTE network, primarily by increasing network density and deploying spectrum,” Shammo said.
Along with the deployment of spectrum, Verizon is counting on investments in small cells, distributed antenna systems and in-building solutions allow it to build upon its current network.
“Our investment strategy is focused on adding capacity to our network to meet increasing demand, which is driven by 4G device adoption and higher customer usage,” Shammo said. “Growth in wireless revenue and profitability continues to be driven by our high-quality retail postpaid customer base, where we continue to see very strong 4G device adoption.”
In the next year, Verizon will focus on improving its capex-to-revenue ratio on a year-over-year basis.
J. Sharpe Smith is the editor of AGL Link and Small Cell Link.
Even though its LTE build-out is complete, Verizon is finding plenty of reasons to increase spending on its wireless infrastructure, officials said on the carrier’s second quarter earnings call. Additionally, deployment has begun on the nationwide 20 megahertz band of Advanced Wireless System spectrum, which it purchased in the latter part of 2012.
“We have essentially completed our initial LTE build-out by matching our 3G footprint. Throughout the rest of the year, we will continue to invest by adding capacity to our existing coverage as we begin to deploy AWS spectrum throughout the network,” Fran Shammo, Verizon Executive VP and CFO, told the attendees of the conference call.
Work on increasing capacity is now taking the place of extending coverage to accommodate LTE user growth.
“Strong connections growth driven by 4G LTE and our Share Everything Plan has resulted in higher demand forecasts and the need for increased capital investment,” Shammo said.
Verizon spent $2.3 billion on wireless capital spending in the second quarter, and through the first half of this year, wireless CapEx totaled $4.3 billion, 8.6 percent higher than last year. Additionally, the carrier is increasing its full-year capital spending outlook from $16.2 billion to between $16.4 billion and $16.6 billion.
Shammo defended the spending increase as “not a huge step up in our capital spend” but an important acceleration in the LTE deployment.
In the first half of 2013, Verizon added 6.2 million more LTE users compared with the first half of last year, and LTE makes up 33 percent of users. Currently, 59 percent of the data traffic now runs on the 4G network.
“We have always said that as customers move into the [Share Everything Plan] and they realize the viability and speeds and the consistency of this 4G network, it’s going to drive them to higher usage. If you look at where video is going in the future, obviously that’s going to continue the proliferation of the usage on this network,” Shammo said.
Looking out two years, based on usage patterns and LTE device sales, Verizon must accelerate capacity more than it previously expected, Shammo said. Shammo defended the spending increase as “not a huge step up in our capital spend” but an important acceleration in the LTE deployment.
“So the incremental investment will more than pay for itself on topline growth from what I see, and again this is really a shift in our capital discipline between wireline and wireless,” he said. “We are going to maintain our lead on the most reliable, consistent 4G LTE network. So that’s what’s driving the increase for CapEx.”