Volume of wireless use is greater than expected so AT&T will spend more dollars on its major 3G growth area with an eye to an LTE future
AT&T Inc. (NYSE: T) said Thursday that it plans to add close to a billion to its capex spend in 2011 to keep pace with continued wireless growth and prepare for the launch of Long Term Evolution (LTE) later this summer. (See AT&T Q2 Revenue Up 2.2% as Profit Dips .)
AT&T originally said back in January that it planned to shell out in the "low-to-mid-$19 billion range" on capital expenditures, with $19.5 billion being at the top end of its predictions. On the operator's second-quarter earnings call, however, AT&T CFO John Stephens extended the full-year prediction to $20 billion. (See AT&T Plans Slight Capex Dip in 2011.)
Wireless is the reason for the increased spend. The operator sold a record number of smartphones, including 3.6 million iPhones activated in the quarter, and added a total of 1.1 million new subscribers, to reach 98.6 million currently in service.
"Wireless continues to exceed expectations," Stephens said on the call. "The volume of use by our customers is greater than we expected."
So part of the increased spend will be simply to improve capacity on its existing 3G deployment through adding more backhaul and additional radios to the network. The operator has infamously been caught off guard by increased strain on its 3G network before. (See AT&T Mobile Boss: NYC & San Fran Are 'Underperforming'.)
Additional backhaul should, however, also help with the deployment of AT&T's LTE network. AT&T is expecting to go live with its first five markets later in this long, hot summer. (See AT&T Building Islands of LTE in 2011 and AT&T Starts Small With LTE .)
"We're on track for launch later this summer," Stephens reiterated.
During the Q&A period, Stephens also said that he believes the advent of AT&T 4G LTE should help the carrier to sell more tablets combined with a wireless plan. "A third of our tablets were sold on a post-paid basis [for the second quarter]," he said. Post-paid is industry jargon for a monthly contract.
Analysts on the call suggested that AT&T still has plenty of headroom to grow in the cellular service side of the tablet market.
"We are working very, very actively on a number of different approaches and LTE will definitely help with that," Stephens suggested.
— Dan Jones, Site Editor, Light Reading Mobile
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