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brooks7
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brooks7,
User Rank: Light Sabre
1/10/2018 | 7:13:05 PM
Re: Tax cut != capex
I think there is this massive disconnect around the value of a tax break as it relates to the deployment of capital.

Essentially, a Tax Cut adds money to the company below the EBITDA line.  It doesn't change the operating conditions in the slightest.  

The idea of a tax cut to feed CAPEX would be that the company would take the extra money and deploy it.  However, this is only one of a multitude of choices including:  Debt Reduction, Stock Buybacks, and Dividend Increases.

The one thing I reject is that these companies are at the point where they don't have enough projects that generate a positive ROI. It is HOW positive the ROI of most of them are.  Note:  A Tax Cut does not impact ROI calculations at all because they are done (in general)above the EBITDA line.  You can know the depreciation of the equipment - if you can figure out the tax treatement (which is changing in some ways as part of the bill).  But the rest of it I, T and A have little or no direct impact from an individual deployment.

As to AT&Ts claim.  It can not be proven.  They could put it out to help in the press, but I have no idea what projects constitute that $1B.  I note the changes from original press at the Carrier Plant in Indiana.  I think any notion that there is direct linkage is PR and not reality.

seven

 
DanJones
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DanJones,
User Rank: Blogger
1/10/2018 | 3:28:12 PM
Re: Tax cut != capex
could be!
Duh!
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Duh!,
User Rank: Blogger
1/10/2018 | 2:04:48 PM
Re: Tax cut != capex
Alternate hypothesis: the tax cut gives them cover to do what they were going to do anyway, while not upsetting Wall St. And AT&T would not be the first corporation to give Trump credit for things he had nothing to do with.
DanJones
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DanJones,
User Rank: Blogger
1/10/2018 | 12:29:54 PM
Re: Tax cut != capex
The difference in approach is notable though. AT&T comes out with a $1B commitment right off the bat.
DanJones
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DanJones,
User Rank: Blogger
1/9/2018 | 10:14:39 PM
Re: Tax Cuts / Whacking Net Neutrality
Wait, what?
Austin Idol
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Austin Idol,
User Rank: Moderator
1/9/2018 | 7:33:28 PM
Tax Cuts / Whacking Net Neutrality
It won't show up in year one but there will be incremental cap ex 3-5 years out. These companies are giant freighters and don't move on a dime. But the author easily makes his political leanings clear.
Duh!
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0%
Duh!,
User Rank: Blogger
1/9/2018 | 3:48:31 PM
Tax cut != capex
His candor is much appreciated. The capex budget was decided long before the tax cut bill. These companies work on 3-5 year planning cycles. There is no backlog of "shovel-ready projects" waiting for cash flow to free up.

I still expect VZ capex to trend upward over the next few years, for OneFiber and 5G roll-out. Because it tracks with their announced strategy.  Not because of a tax bill.


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