Could Trump Tax Cuts Cause a Capex Climb?
Major US operators have made no secret of their desire for a massive corporate tax cut. This Wednesday, the Trump Administration is giving them what they want -- announcing a plan to cut the rate from 35 percent to 15 percent.
Cutting the corporate tax rate to 15 percent has been one of the cornerstones of the Trump agenda since the campaign. A move that has been hotly anticipated by all of the four major US mobile operators.
In particular, AT&T Inc. (NYSE: T) CEO Randall Stephenson has suggested that a cut to the corporate tax rate will motivate Ma Bell to spend more on its wireless network, deploying more 4G spectrum faster.
In January, AT&T laid out its capital expenditure (capex) plans for the year, predicting it will spend up to $22 million over the course of 2017.
"If we get tax reform I would suggest that there could be upside to this guidance," the CEO said on the operator's fourth quarter earnings call in January. (See AT&T CEO Hoping for a Trump Bump in 2017.)
Stephenson is not alone; CEOs and CFOs from all the major operators have made statements celebrating potential tax cuts and, as T-Mobile US Inc. CEO John Legere suggested just this week, "light-touch regulation" of the industry that could lead to many more mergers and acquisitions.
There's a catch of course: The Trump tax plan still needs to be approved by lawmakers. The White House is hoping to pass it by the end of the year.
But, will AT&T -- and others -- hike up their capex spend if Trump's tax plan becomes law? It'll be something to watch through the coming months. Telco executives have made big promises, that's for sure.
— Dan Jones, Mobile Editor, Light Reading