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Why Verizon Is Focusing Its Capex on Network Densification

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Verizon’s capex spending

Verizon (VZ) has been making significant investments in capital expenditures (or capex) to enhance its network and acquire additional spectrum for future use. The telecom company has spent $11.3 billion on capex in 9M17, compared to $11.4 billion in 9M16.

During 3Q17, the company devoted much of its capital spending on its network related to maintaining leadership in its markets.

During the Wells Fargo Media and Telecom Conference held on November 7, 2017, John Stratton, Verizon’s EVP and president of its global operations segment, discussed the company’s capital expenditures going forward.

Stratton stated that the company would devote much of its capex to its Wireless segment for network densification, which includes small cells and DAS (Distributed Antenna System).

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Stratton added, “If you think about it, because of the nature of 5G, the difference in propagation of those—of the networks that will be built on that 5G standard, having what we call low and tight design for our array of cell sites, small cells, DAS and the like, is such that moving to a densification regime to increase capacity under LTE is a very natural sequential step towards supporting the architecture of the next-generation networks.”

Expected capex investment in 2017

Verizon’s management expects its consolidated capex for 2017 to be at the lower end of $16.8 billion–$17.5 billion. During this period, AT&T (T) anticipates spending ~$22.0 billion on capex. T-Mobile (TMUS) expects cash capex to come in at $4.8 billion–$5.1 billion range excluding capitalized interest.

Sprint (S) expects its cash capital expenditures to come in at $3.5 billion–$4.0 billion in fiscal 2017,[1. fiscal 2017 ending March 2018] which excludes devices leased through indirect channels.

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