SDN and NFV have operators planning for lower capital expenditures, but that's not yet being reflected in their projections for 2014.

One of the big promises of NFV is the ability to buy lower-cost, off-the-shelf hardware and manage it with software. It's a money saver for the operators, but a potential threat to their equipment suppliers that rely on them to constantly upgrade their hardware. So far, however, it appears that lower capex is just a goal of the operators. (See Defining SDN & NFV.)

AT&T Inc. (NYSE: T), Verizon Wireless , Sprint Corp. (NYSE: S), and T-Mobile US Inc. have all wrapped up their fourth-quarter earnings, and on average, their wireless capex projections for this year are flat, none significantly decreased.

AT&T was the only exception, but with an expected capex decline of less than 1%. Last year saw it spend more money as it began its Project Velocity IP (Project VIP) build, but it's lowered projection for 2014 comes as it shifts its spending from hardware to software.

AT&T CEO Randall Stephenson said on the carrier's fourth-quarter earnings call that 2014 would be the peak year for Project VIP investment. But, according to Raymond James Financial Inc. (NYSE: RJF) analysts, the bulk of AT&T's spend will now actually go towards Project Agile, its plan to streamline its operations and simplifying its processes to improve customer interaction. (See AT&T Reports Q4 Leap in Revenues, Profits.)

"As such, we expect the incremental capex favors labor and software and not equipment in 2014," the analysts wrote in a research note. Raymond James expects this shift to hurt some of its wireless equipment vendors like Alcatel-Lucent (NYSE: ALU), CommScope Inc. , JDSU (Nasdaq: JDSU; Toronto: JDU), Dycom Industries Inc. , and Synchronoss Technologies Inc. (Nasdaq: SNCR).

LTE spend continues
Verizon's focus for 2014 is continuing to deploy capital to increase the capacity and density of its LTE network. As such, it is forecasting a range that could see it slightly decrease spending or increase it by up to 1%. (See Verizon's 4G Strength Keeps It Above the Fray.)

AT&T and Verizon were both able to lower their capex spend expectations because they are significantly ahead of Sprint and T-Mobile in their LTE network build outs. For Sprint, most of its heavy lifting came in 2013 when its spending increased 13%, but it's far from over. This year it's expecting to spend 9% more as it brings Spark to more markets and plans to cover 250 million people with LTE by mid-year. (See Sprint Adds 58K Postpaid Subs in Q4 and Sprint Eyes SDN to Re-Craft Its Core.)

For its part, T-Mobile CEO John Legere said he is happy with the carrier's "good, balanced capex portfolio." The scrappy smallest operator plans to spend $4.3 to $4.6 billion in 2014, and Legere jibed his competitors that with significant capital it would be able to close the gap on the larger tier ones quite easily. How might it get that extra capital? Legere suggested consolidation in the industry could help there. (See Is SoftBank Ready to Reunite With Legere?)

"And it also isn't hard to understand why we have a position that we've espoused consistently that, over time, this industry is ripe for the impact of further consolidation, which is one of the ways to have significant capital exploited to try to close that gap," Legere said on the earnings call. "But our own growth right now and our capital profile, we feel is balanced and allows us to do the things that we've outlined."

— Sarah Reedy, Senior Editor, Light Reading

Want to learn more about SDN and NFV? Check out the agenda for Light Reading's Big Telecom Event (BTE), which will take place on June 17 and 18 at the Sheraton Chicago Hotel and Towers. The event combines the educational power of interactive conference sessions devised and hosted by Heavy Reading's experienced industry analysts with multi-vendor interoperability and proof-of-concept networking and application showcases. For more on the event, the topics, and the stellar service provider speaker lineup, see Telecommunication Luminaries to Discuss the Hottest Industry Trends at Light Reading's Big Telecom Event in June.