Having spent about $7.2 billion in the first half of the year – just $4.0 billion of that in the second quarter, below some analysts’ expectations – AT&T reiterated its previously voiced expectations of spending $17 billion to $18 billion for the entire year, suggesting that 58% to 60% of its annual budget would be spent in the back half.
In particular, AT&T will focus near-term spending on the deployment of its 7.2-Mb/s HSPA wireless network.
“We’re stepping up capex in a number of areas [in the second half],” Rick Lindner, AT&T’s chief financial officer, said during today’s earnings call. “Probably the number-one area is in wireless, where we’re continuing to build additional coverage and capacity in 3G…In addition to that, we’ll be spending some dollars in the wired portion of the network, providing the backhaul between cell sites and switches…You’ve got to have that wired infrastructure to handle the data traffic there.”
AT&T’s Q2 earnings, with its strong iPhone activations, demonstrated the company’s increasing reliance on the iPhone, which, according to Bernstein Research analyst Craig Moffet, accounted for about 75% of AT&T’s postpaid growth in the quarter. So the fact that even the company’s wireline spending priority this year will be on wireless backhaul is not surprising.
Where AT&T is having the most trouble, in business services (revenue there was down nearly 6% from a year earlier), it continues to weather the harsh economy by cutting costs. In that segment, Lindner said, “We’re not planning on an economic recovery [this year] that would drive a turn at this point in enterprise revenue growth and volumes. If it occurs, or starts to occur earlier, we’ll be pleasantly surprised.”