The big four U.S. mobile operators are ramping up their capital expenditures as they plunge headfirst into LTE deployment and expansion, according to a research note from Jefferies & Company.
"2012 could be the first year in recent memory where all of the major operators in North America are spending aggressively at the same time. We think that Q2 and Q3, in particular, look very strong," according to the note written by Jefferies equity analyst George Notter.
AT&T (NYSE:T) and Sprint Nextel (NYSE:S) are expected to open up their wallets imminently, while T-Mobile USA and Verizon Wireless (NYSE:VZ) already have.
AT&T's capex binge is arriving more slowly than previously expected but orders and receipt of product shipments picked up in the past several weeks for both wireless and wireline equipment, said Notter. AT&T's LTE spending could increase two times this year versus what was spent last year, but the operator is likewise slashing its W-CDMA capex in some areas. To support its LTE rollout this year, AT&T will likely keep putting out the cash needed to bring Ethernet to its cell sites, stated Notter.
Sprint also was slow to hop on the LTE capex bandwagon, partly because turning up software-defined radios for its Network Vision overhaul project slowed deployment efforts, but the operator has now begun physically deploying tower infrastructure, including antennas and hybrid fiber cabling, in all of its Phase 1 cities, with work in Phase 2 cities to follow. "The carrier is expected to ramp quickly as they cookie-cutter out their deployments of software-defined radios," wrote Notter, adding that Sprint plans $6 billion worth of capital spending this year vs. only about $3 billion last year.
T-Mobile USA, which held back on spending for the past year while it attempted to merge with AT&T, has regrouped and is now pursuing additions of radio-frequency carriers, HSPA+ upgrades and "new cell sites designed to get more of T-Mobile's traffic off of roaming agreements," said Notter. He predicts Ericsson (NASDAQ:ERIC) and Nokia Siemens Networks, T-Mobile's existing 3G vendors, are likely to win nods as radio vendors for the operator's LTE infrastructure, to which it has committed $1.4 billion in additional capex spending over the network two years.
Verizon Wireless, meanwhile continues its standard level of infrastructure investments, though it is reducing its CDMA spending in favor of LTE, said Notter.
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