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Why Sprint’s Network Capex Could Remain Elevated

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Sprint’s capital expenditures

Sprint (S), the fourth-largest wireless carrier in the United States (SPY) invests in capex (capital expenditure) to improve its network. In fiscal 2Q17,[1. fiscal 2Q17 ended September 2017] Sprint spent $0.68 billion on cash capex excluding devices leased through indirect channels, compared to $0.47 billion in fiscal 2Q16.

Sprint’s YoY (year-over-year) growth was primarily driven by higher network spending, as the company looks to ramp up its densification initiatives.

During the UBS Global Media and Communications Conference held on December 5, 2017, Tarek Robbiati, Sprint’s chief financial officer, discussed Sprint’s capital spending going forward.

Robbiati stated that the company expects annual network capex to be in the range of $5.0 billion–$6.0 billion for several years. He expects this metric to return to a $4.0 billion–$5.0 billion annual run-rate level.

Network deployment would include expansion of existing coverage by adding new macro sites, increasing capacity tenfold by aggressively rolling out massive MIMO (multiple-input and multiple-output), and small cell densification including mini-macros and Magic Boxes.

Expected capex investments in 2017

Sprint anticipates its cash capital expenditures to reach $3.5 billion–$4.0 billion in fiscal 2017,[2. fiscal 2017 ending March 2018] excluding devices leased through indirect channels.

For 2017, T-Mobile (TMUS) expects cash capital expenditures to come in at $4.8 billion–$5.1 billion range excluding capitalized interest. Verizon (VZ) expects capital expenditures to come in at $16.8 billion–$17.5 billion range. AT&T (T) is expected to spend nearly $22.0 billion on capital expenditures in 2017.

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