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| $4B Cut in Verizon, AT&T Fiber+ DSL Spending |
| Friday, 23 July 2010 09:28 |
 Verizon's wireline capital spending in the first six months of 2010 was 3.35B down nearly $1B from last year. For the full year that is nearly a $2B drop, which corresponds to their plan to cut the FiOS build in 2010 by 2/3rds. Since they've also cut the post 2010 FiOS build by 2-4M homes, this is probably a permanent drop. The numbers at AT&T are similar but not broken out. AT&T cut U-Verse by 1/3rd last year, one reason they went 92K negative on broadband this quarter. Spread over 4 years, the total cut in Verizon wireline/FiOS spending would be about $7B, about the same as the total government money spent on the broadband stimulus. It also corresponds to the Verizon's likely share of the broadband tax. (I am writing separately that the broadband tax will go mostly to the company's bottom line, not expanding broadband.)
These multi-billion dollar cuts came after the U.S. enacted a stimulus program and now is talking about huge subsidies supposedly for broadband. Ivan is a smart guy who told investors that he thinks the government will pay up if he doesn't invest. The stimulus, as Tom Hazlett predicted, resulted in fewer new broadband connections as company after company reduced spending hoping the government will pay instead. Verizon is claiming 20-30% of their lines require a subsidy and asking for billions or they might discontinue voice service. Ironically, V & T just reassured wall street their wireline margins are staying up.
Brett Feldman if Deutsche Bank just put a buy on T, citing among other factors the stability in wireline.
V & T saw their profits and stock price jump despite the broadband failures because wireless is doing so well and they are firing so many workers. That's called "maintaining tight control on expenses." They've eliminated 20,000 jobs lately. Lindner also points to "increasing ARPU." Much of that is their ability to raise prices because competition and regulation are both weak.
CFO Killian projects the total AT&T capex for the year about flat at $17B. Most of this year's wireline/FiOS cut will invested in wireless. John Hodulik projects they will cut back even further this year, perhaps another half-billion. Verizon's capital spending is significantly down as a % of sales and per customer, as Alltel has made them a much bigger company while the gross spending has been about flat. Verizon's spending does remain above depreciation and by most measures Verizon is investing more than any other large North American telco.
AT&T dropped capex in 2009 an amazing $3B, which is the actual cause of the iPhone network problems. They paid a high price and have to restore some of that this year. CFO Lindner pointed to cable clobbering them in areas without U-verse as the primary cause of the decline. "We have seen competitors become more aggressive with promotions targeted specifically at our non-U-verse areas. And we will respond." Meanwhile they are both upselling and raising prices. "Our overall consumer broadband ARPU is up year-over-year over 5%. And our consumer revenue per household is up about 7.5%. ... it gives you the opportunity to maintain and strengthen margins."
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| Last Updated on Saturday, 31 July 2010 17:11 |