A Closer Look at AT&T’s Capex Priorities

AT&T (T) has been investing in its network. In last year’s fourth quarter, its capital expenditure fell slightly YoY (year-over-year) to $4.2 billion from $5.1 billion.

At the Morgan Stanley Technology, Media and Telecom Conference on February 27, AT&T CFO John Stephens stated that AT&T expects gross capital expenditure of ~$23 billion this year, excluding its FirstNet reimbursement of $1 billion.

AT&T is focusing on NFV (network function virtualization) and SDN (software-defined networking) technology to virtualize its network functions rather than spending on dedicated fixed hardware. It believes the combination of its SDN and NFV network solutions could reduce network delivery and SG&A (selling, general, and administrative) expenses and offer rapid service delivery. Approximately 65% of AT&T’s network functions were virtualized by the end of last year, and the telecom company anticipates reaching ~75% virtualization by the end of 2020.

This year, Verizon (VZ) expects capex of $17 billion–$18 billion, while T-Mobile (TMUS) expects capex (excluding capitalized interest) of $5.4 billion–$5.7 billion.