Well it’s been a long time coming, but the AT&T/DirecTV deal has finally been approved by the FCC, and the tower industry is saying, “What now?” It’s been a slow year so far for AT&T in the tower world, and many have noted that the carrier’s pullback has slowed their own work down. Now that the deal has been approved, will AT&T’s work pick back up again? Jonathan Schildkraut of Evercore ISI discussed the particulars of AT&T’s annual capex guidance during their second quarter earnings call last week. “AT&T maintained its annual capex guidance of $18 billion but noted the figure would now include the expected spend for upgrading its recently acquired Mexican wireless network,” Schildkraut wrote. “In speaking to management, they did indicate that the overall mix shift in spending would further tilt toward wireless (from wireline) – implying that even though U.S. capex will be down vs. prior expectations, the amount spent on wireless infrastructure may still remain in the same range.” Schildkraut also noted that when AT&T first announced their $3 billion investment into Mexico by year end 2018, the firm through spending would begin in 2016, but the company made it clear it was start this year. “This is obviously more than ‘nothing, and implies that American Tower’s expectations for 2015 could be positively impacted on an expected acceleration of spend this year,” Schildkraut wrote. “Mexico is 7-7.5% of AMT’s revenues and we believe could add 70-80bps (basis points) to AMT’s top-line growth rate over the next 3 years.” Of the $18 billion in capex the company expects to deploy in 2015, management signaled that roughly 58% of that would go toward wireless. “This implies wireless capex of $10.4 billion in 2015,” according to Schildkraut. “Assuming AT&T deploys $600 million in Mexico this year, U.S. capex falls to $17.4 billion. Management indicated that the mix shift would further favor wireless. At 60% of the U.S. spend aimed at wireless, this would imply the same $10.4 billion in wireless spending.”
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