AT&T, Verizon Vow to Boost Sales Before 5G-Fueled Debt Comes Due
March 12 2021 - 1:51PM
Dow Jones News
By Drew FitzGerald
Cellphone carriers that spent years promoting their blueprints
for new fifth-generation wireless networks devoted the past week to
explaining how they plan to pay for them.
AT&T Inc. and Verizon Communications Inc. said they would
spend billions of dollars more in the coming years on
cellular-tower equipment, fiber-optic lines and other
infrastructure to use new wireless spectrum licenses they acquired
through a federal government auction. T-Mobile US Inc. said it
would put the new licenses to use without increasing its capital
budget.
AT&T reassured investors Friday that it wouldn't need to
slash its $15 billion annual dividend this year to pay its tab.
Verizon, meanwhile, on Thursday launched a $25 billion bond sale to
spread the costs over several years.
The plans, detailed in a series of online investor events this
week, will add more obligations to an already debt-laden wireless
sector. The Federal Communications Commission earlier this year
sold $81 billion of C-band spectrum licenses, a coveted swath of
radio frequencies already used in other countries to carry 5G data.
Analysts expect the auction winners to spend another $14 billion to
help move current C-band satellite users into nearby spectrum bands
to clear the sold-off licenses for cellular service.
Verizon, which committed more than $53 billion to the C-band
licenses including clearing costs, said Wednesday that its capital
spending will increase by $10 billion over the next three years as
it wires more cell towers to transmit the new signals.
AT&T said it plans to spend another $6 billion to $8 billion
on C-band deployment, mostly between 2022 and 2024. The increase in
capital spending adds to a nearly $28 billion bill, including
clearing costs, for the spectrum it bought.
The carriers plan to pay for the spectrum splurge through
increased revenue. Verizon said its core revenue base will grow by
more than 2% this year and more than 3% over the following two
years. The company predicted its customers will upgrade to more
expensive unlimited-data wireless plans supported by the
high-capacity 5G network. Executives also highlighted future
opportunities from cloud-computing customers and business
users.
AT&T affirmed its 2021 financial projections, which called
for total revenue growth around 1% and stable adjusted earnings
compared with 2020. The Dallas company also repeated its commitment
to shareholder dividends, which cost about $15 billion last year,
and forecast subscriber growth for its HBO business.
T-Mobile staked its business plan on adding more cellphone
customers, largely at rivals' expense. The all-wireless company
said it has room to grow in mostly rural areas once dominated by
AT&T and Verizon.
All three companies also pledged to use their cellphone
infrastructure to beam internet service to home broadband
customers,
T-Mobile promised to serve 7 million to 8 million home-internet
customers within five years, focusing its offers on areas that lack
competition for broadband-level speeds. Verizon said its
fixed-wireless will cover 30 million households in the coming years
but didn't detail its expectations for total subscribers.
AT&T said it would use C-band frequencies to connect
households in some far-flung areas where fiber is too expensive to
build. But its division leaders said the company's airwaves will
mostly serve mobile devices because of the relatively large data
loads that big-screen televisions and other household devices
demand.
"That starts to put a real tax on the mobile network," AT&T
Chief Executive John Stankey said during the company's Friday
investor update, adding that for home broadband service executives
"still believe it's really wise to invest in fiber in a prudent
fashion."
Industry executives also revealed some potential bones of
contention about each company's plan for 5G coverage. Verizon's
technology chief said the C-band spectrum it amassed was so
powerful that it could cover most of its service area without
needing more cellular towers.
T-Mobile disputed that math and said the midrange frequency
wouldn't travel far enough to reach many suburban and rural
customers. T-Mobile spent less to acquire C-band licenses because
it is already counting on a cache of lower-frequency spectrum
acquired from Sprint to fill in the areas that C-band won't
cover.
"It's just physics," T-Mobile Chief Executive Mike Sievert said
in an interview. "The signal only reaches only two-thirds as
far."
Representatives of Verizon, the country's largest cellphone
carrier by subscribers, said their existing tower network is dense
enough to meet future needs.
"We build our network to have overlapping coverage," Verizon
technology chief Kyle Malady said earlier in the week. "So the
C-band fits exactly right in this," he said. "We don't see a need
to go down into low-band spectrum to augment an uplink."
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
March 12, 2021 13:36 ET (18:36 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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