Verizon Communications’ decision to sell wireline assets to Frontier Communications seems to have freed up more capital for investment in wireless. During the telecom operator’s earnings call, the company said wireless capital spending totaled $2.9 billion in the quarter and $8.5 billion year-to-date, up 8.4% from a year ago.
Analyst Simon Leopold of Raymond James sees Verizon investing as much as $11.7 billion in its wireless network this year, with a focus on network densification. Simon told investors that some investment will shift toward wireless as a result of the landline asset sales.
“Verizon is unlikely to make material investments and upgrades in these footprints before the sale; the cash generated will likely be concentrated towards wireless improvements, leading to a shift in capex towards wireless,” Leopold wrote in a research note. “We consider the news positive for CommScope on wireless densification; neutral for Alcatel-Lucent, Arris, Ciena, and Ericsson; and negative for Dycom and Juniper based on capex mix shifts.”
CommScope is seen as a beneficiary because it is the world’s largest vendor of distributed antenna system equipment, and Verizon Wireless is focusing on DAS and small cells as it works to densify its network.
“Our densification program is progressing well and is achieving the capacity gains that we expected on the spectrum that is in service,” Verizon CFO Fran Shammo said during the company’s earnings call. “For example, in Chicago, we are on our plan for small cell deployments, covering key locations with distributed antenna systems and expanding our in-building coverage. This has helped support approximately 75% data growth on the network while maintaining our No. 1 ranking in network quality according to both internal and external competitive benchmark studies.”
Verizon Wireless is also in the midst of a small cell deployment in San Francisco ahead of the 2017 Super Bowl.
During the fourth quarter, analysts expect Verizon to invest roughly $3 billion in its wireless network. After the carrier reported $2.9 billion in wireless capital expenditures for Q3, Wells Fargo Securities analyst Jennifer Fritzsche said she expects steady wireless capex from Verizon during the remainder of the year. Raymond James’ forecast is a bit more bullish, suggesting that Verizon could spend as much as $3.2 billion in the fourth quarter.
Image source: Chicago Tribune
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