Verizon's CFO 'pretty excited' about potential for reduced network capexVerizon's CFO 'pretty excited' about potential for reduced network capex
Verizon is spending billions of additional dollars on capital expenses over the next few years. But that higher level of spending isn't permanent, according to the company's CFO.
June 16, 2021
Verizon is in the midst of a substantial increase in network spending, an effort that promises to pour billions of dollars into the coffers of its vendors over the next few years.
But in 2024 and beyond, Verizon's CFO is hoping that deluge will dwindle to a trickle.
"If you look just a few years out, you can see how the capital intensity of the company could be in a very different position," Verizon's Matt Ellis said during a recent investor event.
Ellis laid out the reasons he believes Verizon's capital expenses could fall significantly sometime after 2024.
First, he said Verizon's fiber-buildout program will be largely finished. That project, dubbed One Fiber, involves Verizon building fiber across dozens of major markets in support of its enterprise customers and 5G network. Verizon has remained largely mum about the overall scope of that project – the carrier has said it stretches across roughly 60 unnamed markets that are not in its Fios fiber footprint – but Ellis suggested that project would be mostly finished by 2024. He said only the "success-based stuff" would continue after that timeframe, but the "core" buildout would be finished, thus lowering expenses.
Apart from fiber, Ellis also mentioned Verizon's "intelligent edge" network-upgrade efforts. That project, he said, involves collapsing down the transport, core and other layers of Verizon's network into something that would be much simpler and cheaper to manage. And he said the operating expenses for Verizon's network would be significantly reduced as that "intelligent edge" project comes to a close in the next few years.
Focusing on 5G
Finally, Ellis discussed Verizon's upgrade to 5G and how that project could reduce the operator's overall network expenses. For one thing, he said 5G is more efficient than 4G and 3G, and therefore will be able to handle more data at a lower cost. But Verizon's upgrade to 5G also means the company won't need to invest in its legacy network technologies. "Our need to continue to add more capacity to our 4G network is going to really start to drop off as you get to '23 and '24," he said.
Further, Verizon plans to shutter its 3G network completely at the beginning of 2023, eliminating the company's need to maintain that operation.
"You add up all those things together ... and I get pretty excited about where the capital intensity could be," Ellis said.
To be clear, Ellis is working to paint a silver lining around Verizon's capex increases over the next few years.
Verizon executives said in March the operator will spend an extra $10 billion on capital expenses to deploy its C-band spectrum from 2021 to 2024 – spending that will be in addition to the operator's typical $18 billion in annual capex spending. Ericsson and Samsung are Verizon's main 5G radio vendors, while Corning is one of Verizon's top fiber suppliers. Verizon hopes to cover up to 250 million Americans by 2024 with speedy midband 5G using its C-band spectrum licenses.
Verizon isn't the only 5G network operator entering a period of increased network spending. T-Mobile is in the midst of a five-year, $60 billion network upgrade project following the close of its Sprint acquisition last year. And AT&T is spending up to $8 billion over the next three years to upgrade its own 5G network with C-band spectrum licenses.
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