As 2016 comes to a close, it’s time to take a look toward the future that 2017 will bring. And according to Wells Fargo, that future looks fairly bright for carrier capex and service revenue.
After a particularly slow year for capital expenditures in 2016, Senior Analyst Jennifer Fritzsche said in a Monday note U.S. wireless carriers are expected to pick up the pace in the new year. In particular, Fritzsche pointed to AT&T and Sprint as those likely to step up spending the most.
“We anticipate that wireless spending overall will accelerate in 2017, with the largest increases coming from AT&T and Sprint,” she wrote. “At Sprint, the carrier has delayed some capex in FY2016 due to the procurement of permits for its densification plans, so we expect FY2017 to increase from the $3B or so it will spend in FY’16. Given the fact Sprint’s liquidity position has significantly improved (over $12B in total liquidity) we would not be surprised to see this ramp to $5B+”
Fritzsche said rival AT&T’s spending is expected to ramp as the carrier potentially moves to deploy more of the $18 billion in AWS-3 spectrum it purchased in 2015, but noted the exact amount will likely depend on how much the it spends in the incentive auction and whether or not it takes home the FirstNet buildout contract.
Verizon is also expected to bump its capex from $11.5 billion in 2016 to $11.9 billion in 2017 as it continues its small cell densification efforts and fiber spend ahead of 5G. T-Mobile’s capex figure will likely be stable year over year as the Un-carrier moves ahead with deployment of its 700 MHz A block spectrum and geographic expansion, she said. During a Monday investor conference, T-Mobile pegged its low-band and coverage expansions as top priorities moving into 2017.
Though services revenues declined nearly across the board – excepting T-Mobile – in the third quarter 2016, Fritzsche said those figures are expected to recover over the next year, with T-Mobile leading the pack. The change is expected to come now that carriers have more than half of their postpaid phone bases off unsubsidized service pricing, she said.
“We are projecting T, S and TMUS all to grow service revenues in 2017, while VZ will likely be slightly negative but return to yr/yr growth by Q4’17,” Fritzsche wrote. “TMUS has been by far the leader in both total and service revenue growth, with growth of 17.8% and 13.2%, respectively, in the latest quarter … We expect TMUS to be the leader in both service revenue growth and postpaid ARPU in 2017 as well.”
