Wireless Capex to Grow 13% in 2012

Sprint expects to spend $6B on its network next year, which is good for its equipment partners, but potentially troublesome for its finances

Sarah Thomas, Director, Women in Comms

February 8, 2012

2 Min Read
Wireless Capex to Grow 13% in 2012

The U.S. wireless market will see a 13 percent bump in capital expenditures amongst the wireless operators, according to new projections from Morgan Keegan & Company Inc. , following Sprint Corp. (NYSE: S)'s fourth-quarter earnings. (See Carrier Capex Could Rebound Quickly.)

Sprint's earnings included a forecast of $6 billion in 2012 capex, higher than the consensus expectation of $5.6 billion, as the carrier builds out its Network Vision and adds capacity for the iPhone. Sprint's plans to spend less than Verizon Wireless at $8.6 billion and AT&T Inc. (NYSE: T) at $10.4 billion, but help ramp up the industry's total as the big three build out Long Term Evolution (LTE), upgrade 3G and invest in Wi-Fi offload. (See AT&T Banks on Broadband, Cries for Spectrum, VZ iPhone Boosts Data, Shaves Margins in Q4 and LTE to Dominate Wireless Infrastructure Spending by 2013.)

Sprint spent $2.8 billion in 2011 and had previously forecast it would spend $10 billion in capex over two years, contingent on finding vendor financing. (See Sprint's iPhone Q4 Ouch!)

"We expect vendors to work with partners to help with financing," Morgan Keegan Communications Equipment Analyst Simon Leopold writes in a research note. "This could be a slow process."

But, overall, Leopold says Sprint's capex projections are good news for Sprint's infrastructure suppliers, namely Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), Samsung Corp. and, to a lesser extent, Acme Packet Inc. (Nasdaq: APKT).

Sanford C. Bernstein & Co. Inc. analyst Craig Moffett, however, was less optimistic about Sprint's capex guidance, which was significantly higher than the analyst firm's projections for it. Moffett says that the spending threatens an already-precarious free cash flow story for Sprint.

"We have worried for more than a year that Sprint has been underspending on capital," he writes in a research note. "Even leaving aside their Network Vision investment, a rebound in capital spending has seemed inevitable. That their own forecast is 20% above even our rebound number is a potentially worrisome sign of things to come."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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