Wireless Capex to Grow 13% in 2012
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