AT&T Ups Capex to $20B to Develop 3G & LTE

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
pdonegan67 12/5/2012 | 4:58:17 PM
re: AT&T Ups Capex to $20B to Develop 3G & LTE

The numbers coming out of AT&T and Verizon Wireless these days are very encouraging for the long term viability of the mobile broadband business model. And this in the thick of the worst recession in the memories of the large majority of their subscribers.

True, Sprint and T-Mobile have next to no chance of replicating them and the same is true for many other carriers – even market leaders – in other advanced countries where stiffer regulation and/or competition in mobile services are depressing margins below what AT&T and Verizon are realizing. 

Half an eye certainly needs to be kept on the uptick in AT&T's wireless capex but on the whole, the risks of a mobile broadband profitability crunch look to be diminishing - at least as far as these two carriers are concerned.

gtchavan 12/5/2012 | 4:58:17 PM
re: AT&T Ups Capex to $20B to Develop 3G & LTE

20 billion dollar is meaningless becasue that includes the labor it takes to install the products they purchase and we know that is not cheap.  I really like to know what is the actual dollars amount they are placing with their vendors.  I bet you it won't be even half of that.  

Apple should buy tmobile and setup its own LTE network.  I am willing to pay $100 a month for a true LTE network.

jggveth 12/5/2012 | 4:58:16 PM
re: AT&T Ups Capex to $20B to Develop 3G & LTE

chuckj - that would be a good bet since equipment has been ~35% of capex forever

Gabriel Brown 12/5/2012 | 4:58:16 PM
re: AT&T Ups Capex to $20B to Develop 3G & LTE

In a similar vein, Vodafone said on their quarterly investor call today that European data traffic increased 20 percent year-on-year, and is now growing about the same rate as data revenue. It's a positive picture, especially in Northern Europe.

Voice business is still in decline, but that's due to regulatory price cuts. 

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