US Carrier Capex: Wireless Squeezing Wireline
According to a research note issued by Jefferies analyst George Notter, wireless spend is "looking good" for the second half of 2012. This should be particularly welcome news for Alcatel-Lucent (NYSE: ALU), believes Notter.
"We note that 2012 could be the first year in recent memory where all of the major wireless operators in North America are all spending aggressively at the same time," Notter writes.
Conversely, operators are tending to pare back wireline spending in favor of funneling their capex budgets towards 4G deployments. Notter says the thresholds for carriers to make wireline investments are "getting higher," causing the Jefferies analyst to "feel incrementally worse about those vendors with wireline exposure ... Adtran and Acme Packet primarily."
He adds: "Looking at capital spending guidance from the carriers, we note that North American capex is expected to grow 7.3% in the aggregate for 2012 ... Parsing the data, wireline spending is expected to decline 5.8% Y/Y with wireless spending up 20.6% in total."
The Jefferies team now expects 2012 North American wireline capex to total just more than US$25 billion and wireless investments to reach almost $31.5 billion.
Why this matters The note shows the increasing importance of LTE spend in the North American market. All of the major U.S. operators are now engaged in 4G LTE services or plotting a launch soon. (See What We Mean When We Say '4G'.)
It also highlights the ongoing financial pressures faced by vendors with a significant reliance on North American fixed-line investments.