In this vignette of The 5G Factor, The Futurum Group analysts Ron Westfall and Todd R. Weiss share their perspectives on the CapEx projections into 2024 from the Big Three U.S. mobile carriers, AT&T, T-Mobile, and Verizon.
The discussion centered on:
Communications Service Provider CapEx Snapshot: Looking at AT&T, T-Mobile, and Verizon CapEx Projections
There is now more clarity on the capital expenditure (CapEx) trends of the three major U.S. mobile carriers, AT&T, T-Mobile, and Verizon. The Big Three U.S. carriers have all updated and shared their CapEx spending expectations for the rest of 2023. Notably, T-Mobile’s parent, Deutsche Telekom, and Verizon have outlooks that respectively decrease CapEx 24% and 19% from 2022 to 2023 while AT&T is looking at little to no CapEx decrease. Of concern, Verizon is planning to cut more in 2024. We investigate what the implications of the major CSP CapEx situation means for the 5G ecosystem in both the U.S. as well as China and Europe.
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Transcript:
Ron Westfall: I think a major issue for the global 5G market is operator capital expenditures, how much and in what direction it’s going. In the US, at least that trend is down for the rest of 2023 and potentially into 2024. Now, for example, T-Mobile’s parent company, Deutsche Telekom, is cutting its CapEx from $22.1 billion in 2022 to $16.8 billion in 2023. Now, that’s a dramatic 24% reduction. And so specifically, DT indicated that in the US, they are looking at a strong decrease in CapEx throughout 2023.
Likewise, Verizon is cutting its CapEx from $23.1 billion in 2022 to 18.25 billion to 19.25 billion in 2023. And that’s a sizable 19% decrease. And currently, only 17 billion is projected for 2024. As a result, Verizon’s spending most of the $1.75 billion dollars of the 10 billion that was allocated for C-band CapEx was used in Q1 2023. Clearly, Verizon is part contributing significantly to this downward trend. Now, of the big three US carriers, only AT&T is maintaining near consistent levels with only a slight cut from $24.5 billion in 2022 to $24 billion in 2023. Now, AT&T’s continuing to invest in 5G and fiber over 2023 to pursue long-term growth opportunities. However, to be of note, AT&T is hedging somewhat because of macroeconomic conditions. If they get rockier, could trigger potential dial back in their spending. Now, interestingly, AT&T, T-Mobile, and Verizon all reported decent to good Q2 2023 earnings.
Now, the change in the CapEx picture can benefit the financial picture, the big three. However, for the suppliers to the US big three, the 5G environment has become challenging. We’ve seen players such as Ericsson, Nokia, Crown Castle, even Corning having to adjust their expectations for the rest of 2023. It is a bit of a contrast here, and we’ll cover this later on, is the fact that the big three US carriers actually all reported decent Q2 2023 earnings, whereas for the suppliers, it’s been more challenging. And Todd, from your perspective, what are you seeing in the CapEx picture that is notable? What’s going on, for example, in other parts of the world that caught your eye?
Todd R. Weiss: In Europe, Vodafone has outlined significant changes in its roadmap for the coming years. They’re making a lot of changes. Vodafone, at this point, they’re reallocating investment in FY24 toward customer experience and brand, €150 million and €100 million, respectively. They’re moving money away from hardware to customer relationships, which is a really important thing in the mobile field, I believe. They also have plans to cut a billion euros in costs by 2026, which were announced in November of 2022. Again, they’re moving toward the people aspect rather than the hardware and technology aspect. I think that’s significant for Vodafone to do that.
There’s a zillion users in Europe, and this is actually reflecting what they’re looking for, what they need. I think that’s an important thing. The other thing that I thought was interesting, China Telecom, for instance, they have changes. Their changes this year, CapEx on industrial digitalization, including cloud, AI, big data, digital platforms. They’re increasing those by 40%. While China has a huge number of users, they’re going to be bringing more hardware and more services and software to help their customers, which is probably what the demand is in China, I would say.
Ron Westfall: In fact, I think what is being underlined here is that for the most part, the major operators, the top CapEx sources, are basically looking to cut costs continually. And one way to do that is to shift resources, to put more emphasis on CapEx, but also to streamline their systems to quite simply make them more efficient. And one key way to do that is through automation and also using AI engines. Naturally, I’ll be keeping a close eye on how this is progressing. This is something that I think will benefit customers most importantly, but also I would say the entire 5G ecosystem because it will deliver better experiences and also enable the workforce of the major operators to focus more on developing just that, those valuable experiences, making the billing, for example, more user-friendly. And I think we’re going to see that in some of the results that we’ll address a bit later on.
And so I think these are the key takeaways. Even though the CapEx picture is going down, at least in some parts of the world, we’re still going to see some important spending in some key areas that will keep things very interesting. India, for example, is going to be, I think, a significant source of CapEx over the rest of this year and into 2024 to offset the significant US declines.
Other insights from The Futurum Group:
T-Mobile Q2 2023: Breakthrough Growth in Customers and Profitability
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
