AT&T projects 15% capex increase for 2018
Fiber deployment expected to be a major focus
by Martha DeGrasse
AT&T is projecting record capital spending for this year thanks to the U.S. government. Tax reform is boosting the carrier's capital budget by $1B, while government reimbursements for the FirstNet build will add another $2B.
Overall, AT&T plans to spend almost $25B this year. Without FirstNet and tax reform, the 2018 spending projection would be just under $22B, the same amount AT&T spent in 2017.
"Tax reform changes everything as it relates to capital allocation," CEO Randall Stephenson said on the company's quarterly earnings call. "When you're suddenly looking at your after-tax returns improving by 20% roughly, it just changes how you think about your investment thesis. It changes the profitability equation on fiber as well as 5G and how you think about rural and how you think about FirstNet. And so it gives us the ability to consider starting to push our fiber deployments faster and further."
Stephenson added the additional billion dollars allocated in response to tax reform would largely fund fiber deployment. AT&T's residential fiber service currently reaches 7 million customer locations and the company expects to double that in the next 18 months. Its fiber footprint also passes 8 million businesses, 1.8 million of which are already connected.
"Without fiber, innovative solutions like highly-secure networking, cloud computing and 5G wouldn’t be possible,” said Mo Katibeh, chief marketing officer for AT&T Business, in a press release.
Fiber will provide both backhaul and fronthaul for 5G deployments, many of which will rely on small cells connected by fiber to cellular base stations. AT&T is targeting a national 5G broadband footprint that could replace fixed line service for many customers.
That vision will require miles and miles of fiber. AT&T already has over a milion global route miles of fiber, and it's ready to build more. Analysts expect AT&T and other carriers to undertake more of their own fiber builds in lieu of leasing. Carriers are asking for lower prices when fiber leases come up for renewal, and threatening to build their own fiber if they can't strike an agreement.