The past two years have been a roller coaster for AT&T (NYSE: T). Despite reporting an upbeat performance for both 4Q21 and full-year 2021, AT&T acknowledges that it has much more work to do. Management is focusing on its core competencies with ambitious plans to accelerate its wireless and fiber infrastructure investments to add new customers and drive new revenue streams.
AT&T must invest substantial capital expenditures to maintain and expand its extensive network infrastructure. Its overall 2021 corporate capex tallied $16.5 billion across wireless, wireline, and media operations. That figure was up five percent from $15.7 billion in 2020 which saw a 20 percent downturn from the $19.6 billion spent in 2019, mainly due to the pandemic. The company provided 2022 capex guidance of $20 billion with a heavy focus on 5G and fiber builds.
AT&T, unlike its peers, relies heavily on vendor financing to augment its own cash capex layout. The company gets favorable rates from its biggest vendors like Ericsson and Nokia that make utilizing this source of funds attractive. Vendor financing was around $3 billion a year through 2020. That figure jumped to $4.6 billion in 2021, as the company ramped up its 5G builds. AT&T expects vendor financing of about $4 billion in 2022, giving it a gross capital investment of about $24 billion for the year.
AT&T no longer provides breakouts of its corporate capex by operating segment. Nonetheless, we estimate that since 2019, wireless capex has been in the $9-10 billion a year range at a capital intensity (capex/service revenues) of 17-18 percent.
For 2022, we expect wireless capex to be in the $11-12 billion range. The incremental increase is coming from C-band deployments for which the company indicated in the aftermath of FCC Auction 107 that it would spend $6-8 billion over the next three years. Most of that allocation will be spent in 2022 and 2023.
For the past three years, capex has been front end loaded, meaning that most of the money is spent in the first half of the year. AT&T points out that once new radios become available in early summer that it will become more aggressive, and spend most of its capex budget through the second half of 2022, as it transitions into the C-band and 3.45 GHz spectrum it won in FCC Auction 110.
More importantly, the company thinks it can gain economies of scale by deploying both 40 MHz of spectrum from the interim A block assignments (AT&T has permanent B and C block assignments) of the C-band and 40 MHz of 3.45 GHz together at one time with one tower climb.
The feasibility of this approach remains to be seen given the number of space and loading variables at any given tower site. Still AT&T CEO John Stankey is confident the one climb strategy, “allows us to start really going what I would call good guns … in scaling that up.” He points out that the combined C-band and 3.45 GHz deployment will cover 200 million POPs with 80-MHz mid-band spectrum by the end of 2023.
“On the wireline side, we expect AT&T to allocate $7-8 billion of its 2022 capex for its fiber-to-the-home expansion,” Stankey said. “The company has set a year-end 2025 target of passing 30 million homes across its 21-state operating area.”
Despite some supply chain issues early in the year, the company installed another 2.6 million homes-passed and added over one million fiber broadband connections, bringing the total to six million connections by year-end 2021. With its recent announcement of new 2 GHz and 5 GHz symmetrical FTTH offerings, AT&T expects to accelerate the number of new fiber broadband connections with what it deems a “superior product” and an expanded footprint.
By John Celentano, Inside Towers Business Editor
Reader Interactions