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A Look at Verizon’s Capex and Free Cash Flow Plans in 2017

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Verizon is spending big on capex

Let’s take a closer look at Verizon (VZ), which has been investing heavily in capital expenditure (or capex) to improve its network and buy additional spectrum for future use.

Verizon has spent $3.1 billion on capex in 1Q17 and just under $3.4 billion in 1Q16. In 1Q17, Verizon dedicated much of its capital network-related spending to maintaining leadership in its markets. Verizon will continue to dedicate much of its capital expenditure in its wireless business to 4G (fourth-generation) LTE (long-term evolution) densification and wireline for FiOS installations.

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According to a Reuters report on April 20, 2017, “More worrisome is [the company’s] cash flow from operations, which tumbled to $1.7 billion in the first quarter from $7.5 billion a year ago. A pension contribution accounts for some of the decline. Capital expenditure, however, was essentially flat, while free cash flow was negative $1.4 billion. Verizon fell short of nearly every expectation on Wall Street.”

Expected capex investments in 2017

Verizon expects its capex to come in at $16.8 billion–$17.5 billion in 2017. In comparison, competitor AT&T (T) is expected to spend ~$22 billion on capex in 2017, whereas T-Mobile (TMUS) forecasts cash capex in the range of $4.8 billion–$5.1 billion, excluding capitalized interest, for the year.

Meanwhile, Sprint (S) expects its cash capex to be in the range of $3.5 billion–$4.0 billion in fiscal 2017, its year ending in March 2018, excluding the impact from leased devices sold through indirect channels.

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