Verizon Communications is continuing to focus on spending to increase its 4G network capacity as users and data traffic migrate to its faster LTE network.
On the operator's second-quarter earnings call Tuesday morning, CFO Fran Shammo said that Verizon Communications Inc. (NYSE: VZ), which took full control of Verizon Wireless this year, spent $2.8 billion on wireless capex in the spring quarter. In particular, Verizon has been adding LTE capacity by layering in advanced wireless services (AWS) spectrum with its existing 700MHz network. (See More 4G Muddling: Verizon Brands AWS XLTE and Marketing Verizon's Double-Wide 4G in NYC.)
"We now have more than 350 markets with AWS, or XLTE we are branding it," Shammo said on the call. "We are investing to stay ahead of demand." (See Verizon Leads With Double-Wide 4G.)
In addition to the expanded LTE, the capacity upgrades will include adding distributed antenna systems (DAS) and small cells to improve localized coverage, Shammo said. (See Verizon Deploys AlcaLu's LTE Small Cells .)
Overall, Verizon expects total capex for the year to remain in the $16.5 billion to $17 billion range, with a decrease in capital spending as a percentage of total revenues for the full year.(See Capex Trend Points to Less Seasonality – Analysts.)
There are good reasons why Verizon is focused on adding more LTE capacity to its network in 2014. Shammo said that 76% of the data traffic on its network now runs over 4G LTE and that number will continue growing.
The operator activated 2.3 million new LTE devices on its network during the quarter. One million of these were smartphones and 1.2 million were tablets.
Shammo highlighted the growth trend in tablets as especially crucial, saying that Verizon currently has 5.4 million monthly contract (postpaid) customers with tablets on the network.
"We see that as a great opportunity to grow in 2014," Shammo said.
He warmed to the tablet topic again in the Q&A portion of the call. "Tablets are extremely good for the industry, not just Verizon," he said, driving traffic uptake and helping to reduce churn. "These 4G tablets drive more usage on the network than 3G smartphones," he added.
Of course, ever-increasing wireless data usage will eventually require more bandwidth for fast data services. In response to questions, Shammo said that Verizon is currently more focused on grabbing AWS-3 spectrum, which will go under the FCC hammer on November 13 this year.
He said that, as yet, the operator is less focused on the broadcast spectrum expected in 2015 at the moment. "There's no final rules laid out."
— Dan Jones, Mobile Editor, Light Reading