US Operators Signal Higher Capex in 2021 After a COVID-Dampened 2020

John Byrne, Service Director

Summary Bullets:

• Despite the impact of COVID-19, capital spending by US network operators was down relatively modestly in 2020, falling by around 4%.

• 2021 guidance from these operators shows a return to roughly similar levels as 2019. Continued demand for additional network capacity along with new 5G imperatives clearly remain.

An analysis of US operator financial results based on Q4 2020 earnings releases shows that while COVID-19 did slow capital investment, it could have been worse. Thanks to a flurry of activity toward the end of the year, the nine publicly-reported carriers, all of which spent in excess of $1 billion in capex, accounted for just over $67 billion in spending. That was down by approximately $3 billion, or 4.2%, compared to 2019. GlobalData estimates that the big three that account for nearly 70% of total capex – AT&T, Verizon, and T-Mobile USA – spent roughly $46 billion, down 6.1% from 2019. However, the bulk of the decline was attributable to AT&T.

Factoring in 2021 guidance provided alongside year-end 2020 results, GlobalData estimates that next year’s spend among these US operators will be up by approximately 3.5%. That would return full-year investment to $69.4 billion, just below the $70.1 billion these operators spent on capex in pre-pandemic 2019.

US OPERATOR CAPITAL EXPENDITURES

Operator

2019

2020

2021

($B)

($B)

($B)

AT&T

19.4

15.6

18.0

Verizon

17.9

18.2

18.0

T-Mobile USA

11.4

12.0

11.9

Lumen

3.6

3.7

3.7

Charter

7.2

7.4

7.5

Comcast

6.9

6.6

6.6

Altice USA

1.4

1.1

1.4

TDS/US Cellular

1.0

1.3

1.3

Frontier

1.2

1.2

1.2

Total

70.1

67.1

69.4

% y/y

-4.2%

3.5%

Source: US operator earnings releases and GlobalData estimates.

A scan of international operator results shows a similar trend of modest decline in 2020 along with the expectation of a modest increase in spending to keep ahead of demand and continue to invest in 5G-related priorities. For example:

• Telefónica reported a significant year-to-year decline in 2020, reducing capital expenditures from €8.8 billion to €5.9 billion, but plans to spend 15% of expected sales in capex in 2021 – implying approximately €6 billion in 2021 capex.

• Orange’s capex declined only slightly from 2019 to 2020, from €7.3 billion to €7.1 billion. However, Orange expects capex to grow to between €7.6 billion and €7.7 billion in 2021.

• Deutsche Telekom saw a minimal decline between 2019 and 2020, from €7.8 billion to €7.7 billion (excluding investments toward T-Mobile USA). DT expects this figure to remain essentially flat in 2021.

• América Móvil spent approximately 16% less in 2021 capex, at $6.7 billion, down from $8 billion. However, América Móvil expects to ramp back up to approximately $7.3 billion in 2021 (not including expected spectrum license purchases).

To network infrastructure vendors, year-end results show relatively good news on two fronts: the major and long-term slowdown from operators in the wake of COVID-19 was less severe and more short-lived than expected, and much of the slowdown now appears to be more related to deferrals (into 2021) rather than cancellation of plans.

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