Broadband services

For AT&T, Suddenly Capex Isn't a Dirty Word

Building networks takes money, but that's not what investors in the US want to hear, and operators know it.

Through late 2014 and well into 2015, AT&T Inc. (NYSE: T) heralded capex declines. Even as the telco started gigabit broadband deployments, capex spending was bottoming out and AT&T was able to emphasize its fiber-fed services in quarterly earnings reports while simultaneously playing to investors with news of cost decreases. (See AT&T Expects Capex Reductions From SDN .)

In other words: deployments up, capex down.

But times have changed. In order to play effectively in the gigabit broadband market, and to earn the revenue benefits of its DirecTV acquisition, AT&T has to spend some money. That trend is evident both in AT&T's late-year 2015 spending and in its outlook for 2016. Fourth quarter capex spending jumped to $6.8 billion over Q3 spending of $5.3 billion, and AT&T has already projected total capex spending for this year at roughly $22 billion, or about a billion dollars higher than its 2015 total.

AT&T has also proudly touted its spending plans, boasting that it will invest nearly $10 billion of the total $22 billion budget in 2016 on enhancements for business services, much of which will go toward network expansion.

Look, Ma! We're spending on infrastructure!

For more fixed broadband market coverage and insights, check out our dedicated Gigabit/Broadband content channel here on Light Reading.

Interestingly, AT&T's changing rhetoric bears a resemblance to some of the language heard at Mobile World Congress last week. The CEO of French telco Orange (NYSE: FTE) was happy to brag in Barcelona about his company's network investments throughout Europe.

"We are the operator that is running out the most extensive FTTH in Europe, in France, in Spain, in Poland, in Slovakia. And we are very proud of that," said Orange CEO Stephane Richard. "And we are happy also because the market is answering very strongly to that new technology. We have recorded 1 million customers in France for fiber and increasing every week… so it's a very strong dynamic in the market."

Orange draws a direct line from network spending to company growth. And now it appears that AT&T is hoping to tell a similar story.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

kq4ym 3/11/2016 | 11:04:39 AM
Re: AT&T Capex Things change. And no matter what AT&T says today, it's going to change. It's no surprise that they're going to have to invest more money in the infrastructure, espicially with the DirctTv deal. Up and down, low capex, high capex. It's a fluid business and I'm not holding my breath that anythings going to be constant or even predictable.
KBode 3/3/2016 | 4:07:48 PM
Re: AT&T Capex What's the breakdown for fixed-line versus wireless in this latest update?
danielcawrey 3/3/2016 | 12:42:27 PM
Re: AT&T Capex Yeah, investors always want lower capex. But there has to be an understanding that as a telco and infrastructure provider AT&T is going to be required to spend heavily to deploy new products and services. This isn't a software startup. 
msilbey 3/2/2016 | 11:49:00 AM
Re: AT&T Capex That is absolutely true. I think a measureable portion of the capex is being spent to make sure AT&T can bring in new revenue from the DirecTV acquisition. 
mkanterman 3/1/2016 | 2:31:56 PM
Re: AT&T Capex Mari, this is a good article, but you have to account for the fact that AT&T acquired DirecTV in late July, so 4Q capex had a full quarter of DirecTV in there whereas 3Q and 4Q14 did not. And the guidance also includes DirecTV, which was running about $3 billion per year.
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