Tier 1 Wireless Carrier CapEx: Steady As She Goes!

August 16, 2016

John Celentano

Principal
Skyline Marketing Group

Celentano

Tier 1 wireless carriers’ 2Q16 financial results showed aggregate capital expenditures (capex) growing 11 percent sequentially from 1Q16 but at lower levels, down 14 percent, compared to spending in 2Q15.

The good news is that the Tier 1s maintained their guidance for full-year capex. AT&T was the outlier suggesting its 2016e capex is trending towards the “low end of the range” without specifying a number.

The Tier 1s, collectively, are planning network investments totaling $26.9 billion in 2016e. That figure is down 11 percent from the $30.2 billion these national carriers spent in 2015. The Tier 1 carriers account for an estimated 96 percent to the total public wireless carrier capex in the United States.

Yet capital spending remains heavily concentrated. Verizon leads the pack with $11 billion or 41 percent of the Tier 1s’ total. Followed by AT&T at 31 percent of the total.

The lion’s share of the investment, more than 60 percent, is applied to radio access network (RAN) infrastructure – macrocells, small cells and DAS. All carriers still are spending on macrocell upgrades and expansions to 4G LTE coverage and capacity in multiple frequency bands. Network densification is accelerating, however, with a shift in spending toward indoor and outdoor small cells, and in-building DAS deployments.

The Tier 1s spent $12.9 billion or 48 percent of their aggregate 2016e budget through mid-year. The $6.8 billion in 2Q16 was up 11 percent sequentially from $6.1 billion in 1Q16 but down 14 percent compared to $7.9 billion in 2Q15.

Capex among Tier 1s should ramp steadily through the balance of the year, even at reduced levels from 2015. We expect 3Q16 spending to stay flat with 2Q, then uptick by 8 percent to $7.2 billion in 4Q16 as the Tier 1s round out their full-year budgets.

The lower but steady spending is little conciliation for wireless equipment vendors and professional service providers for the current year, at least. Nonetheless, accelerated infrastructure spending through year-end, mainly to meet unrelenting mobile data demand, bodes well for continued network expansion into 2017 and beyond.

John Celentano is a principal in Skyline Marketing Group, which provides technology marketing & sales strategy advisory in advanced communications services, and wireless, telecom, data networking infrastructure markets. Additionally, support is provided for internal positions in market analysis, business development, strategic planning, strategic marketing, product management, product marketing, sales operations.

For more information, go to https://www.linkedin.com/in/john-celentano-4822692