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4G (Finally) Starting to Boost US Capex Spend?

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
3/27/2012

4G Long Term Evolution (LTE) upgrades are finally starting to boost U.S. infrastructure spending amongst all four of the biggest operators, a new research note from Jefferies & Company Inc. says.

Verizon Wireless and T-Mobile US Inc. have already upped capital expenditure (capex) on network infrastructure, writes Jefferies Analyst George Notter in a note. He predicts that spending by AT&T Inc. (NYSE: T) and Sprint Corp. (NYSE: S) will start to speed up too:

    Our checks indicate that, while Q1 was generally slower-than-expected, vendors are exceedingly bullish about prospects for the full year. We note that 2012 could be the first year in recent memory where all of the major operators in North America are spending aggressively at the same time. We think that Q2 and Q3, in particular, look very strong. We wouldn't be surprised if Q4 follows seasonal norms in 2012 with some modest slowing of spending into year-end.


LTE is the focus of much of the spending for the operators. Notter suggests:

  • AT&T is predicted to increase LTE spend up to two times this year, with a corresponding spend on Ethernet cell-site backhaul expected. The operator may cut back on its 3G spend as it turns on more 4G.

  • Sprint is expected to spend up to US$6 billion on capex this year, up from $3 billion in 2011. "Now, we're finally hearing that Sprint is physically deploying tower infrastructure ... in all of their Phase 1 cities," Notter writes of the operator's Network Vision upgrades, which should include six LTE cities up in the first half of the year.

  • T-Mobile is "perhaps the biggest change" for capex spend, according to Notter. "At this point, the operator is spending capital on obvious items like RF carriers additions, HSPA+ upgrades, and new cell sites designed to get more of T-Mobile's traffic off of roaming agreements," he writes. The operator is expected to spend $1.4 billion in additional capex layout for LTE upgrades over the next two years.

  • Verizon, meanwhile, has been increasing orders as it looks to move its subscriber base onto its much more built-out LTE footprint that is now up to 203 towns and cities in the U.S.

    Why this matters
    LTE appears to be finally making a large capex impact across the board for all major operators in the U.S. Jefferies notes that this should be good news for vendors such as Alcatel-Lucent (NYSE: ALU), Adtran Inc. (Nasdaq: ADTN), Ciena Corp. (NYSE: CIEN), Juniper Networks Inc. (NYSE: JNPR) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), among others.

    For more



    — Dan Jones, Site Editor, Light Reading Mobile

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    Flook
    Flook
    12/5/2012 | 5:37:49 PM
    re: 4G (Finally) Starting to Boost US Capex Spend?


    The last graph mentions about a half-dozen vendors who'll benefit from higher capex for LTE. I noticed Cisco was not among the vendors mentioned. Was this an oversight or you don't see Cisco as a significant player here? Also, will these vendors benefit because they provide the terrestrial infrastructure--or is there some other reason? Thanks.

    joset01
    joset01
    12/5/2012 | 5:37:48 PM
    re: 4G (Finally) Starting to Boost US Capex Spend?


    Just to be clear, those are among the companies that Jefferies expects to benefit?

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