Marek’s Take: 2022 is the year of peak 5G spending

Marek's take

There’s a lot of money flowing to 5G network buildouts right now as U.S. wireless operators race to expand their 5G coverage. In fact, it’s likely that 2022 to be the peak year for 5G spending by U.S. wireless operators.

Stefan Pongratz, vice president at Dell’Oro Group, said that the company, which publishes a bi-annual telecom capex report, is adjusting its short-term U.S. capex projections upward and expects U.S. wireless capex to grow at a double-digit rate in 2022 and then taper off in 2023 and 2024.

One reason behind Dell’Oro Group’s decision to increase its projections is that both AT&T and Verizon are ramping up their mid-band 5G deployments in the C-band and the 3.45 GHz spectrum bands. Verizon and AT&T both were awarded spectrum licenses in the C-band. Verizon spent $45.5 billion and AT&T spent $23.4 billion on C-band licenses. In addition, AT&T spent $9.1 billion on 3.45 GHz spectrum licenses.

Verizon said earlier this year that it was aiming to cover 175 million people with 5G by the end of 2022, and will make use of the company’s C-band spectrum. During a recent investor day, Verizon CFO Matt Ellis said Verizon will spend about $22.5 billion in capex this year, with $5 billion of that going to its C-band 5G deployment. “2022 is a peak investment year,” he said, adding that the company expects its 5G C-band deployment to continue in 2023 but with less intensity.AT&T, meanwhile, said it plans to cover 70 million Americans with 5G C-band spectrum by year-end. The company said during its annual investor conference this month that its capex for 2022 will be $24 billion and about $6 billion of that will go toward its 5G deployment.

AT&T CFO Pascal Desroches said that AT&T will also spend about $6 billion in 2023, and that 2023 will be its “peak year” for mid-band 5G deployments. In 2024, Desroches said that its capex will once again be in the $20 billion range as the company tapers off its 5G network investments.

T-Mobile, which is ahead of the other two operators in terms of its 5G coverage, has said that it will cover 260 million people with 5G in its 2.5 GHz spectrum by the end of 2022, up from the 201 million people that it covered with 5G in its mid-band spectrum at the end of 2021. The company said its capex for 2022 would be in the $13 billion to $13.5 billion range, slightly up from the $12.3 billion the company spent in 2021.

T-Mobile CFO Peter Osvaldik said during the company’s fourth quarter earnings call with investors that T-Mobile plans to continue the “robust pace” of its 5G deployment and network integration in 2022.  

Dish Networks, which is building a greenfield nationwide 5G network but making use of the latest cloud-centric technologies, said it will spend $2.5 billion in capex this year. The company is under pressure to meet a June 2022 buildout deadline from the FCC and has to cover 20% of the population with 5G by that deadline.

5G capex cycle is longer

Pongratz said that the 5G capex cycle will be longer than past generations of wireless – such as LTE. The reason, he said, is because of all the different spectrum bands that are being used to deploy 5G – from millimeter wave to 2.5 GHz, C-band, 6 GHz and more. Those different spectrum bands make the deployment more complex and also require more sophisticated antennas and radio technology. Plus, spectrum such as the C-band spectrum has to be cleared by current users of the spectrum to make way for 5G. Verizon recently announced that it was trying to speed that process by working with satellite operators to clear out of the C-band ahead of schedule.

Pongratz also noted that there will still be a lot of capex spending in the future to provide much-needed 5G indoor coverage. Pongratz said that while upper mid-band spectrum and millimeter wave (mmWave) spectrum have exceeded expectations in terms of providing coverage and capacity, there are still challenges when it comes to “overcoming some of the outdoor to indoor losses.”  

Because of this, Dell’Oro expects U.S. spending on small cells to start to increase. However, he added that spending on small cells won’t be enough to make up for the “tapering” in spending on the macro network that wireless operators are expecting to happen in 2023 and beyond.