Capital expenditure is one of the most closely watched financial metrics in the wireless infrastructure business, and understandably so. Capex is a forward indicator of planned network investment among the mobile network operators. Importantly, it’s how we all (suppliers, contractors, consultants and yes, publishers) get paid.
This chart is an excerpt from our quarterly Intelligence 2022 Vol 2 market analysis report. The data are a compilation and interpolation of full-year 2022 U.S. mobile network operator capex guidance provided in their respective 1Q22 earnings call and investor presentations. The data shows the actual and projected aggregate U.S. wireless capex among MNOs from 2019 to 2025.
The numbers reflect the high level of activity in nationwide 5G construction and mid-band spectrum deployments through 2025. The tally incorporates guidance from the big three national MNOs (AT&T, T-Mobile, Verizon), smaller operators including DISH Network and UScellular along with several dozen regional carriers and over 1,000 wireless internet service providers.
The aggregate numbers comprise investments in RAN and Core equipment that account for nearly two-thirds of the total spending. The data also includes spending for backhaul (either owned fiber or microwave), back-office billing and network management systems, DC power and backup batteries, and professional services (site acquisition, E&I). Capex breakouts by MNO and by product category are available in separate charts in Intelligence by InsideTowers.
In this analysis, 2022 will be the peak year reaching nearly $50 billion, a record level for the U.S., then scale down as 5G macrocell buildouts near completion and a big shift to small cell rollouts occurs by 2024-25. This outlook should not be interpreted as a negative for the industry, however. It is important to understand that capex is not an ever-increasing amount, as it is often depicted in curves going high and to the right in market research reports.
Rather, capex is inherently cyclical as MNOs finalize various network buildout and modernization phases. In this case, C-band deployments which added significant but short term incremental capex will mainly be completed by the end of 2023. 5G wide area coverage build out will reach some plateau by 2023-24, then the work will shift to small cell deployments. Certainly, vendors, contractors and consultants will have to adjust appropriately. That said, we should expect capex to remain above historical spending levels as long as demand for mobile data coverage and capacity continues to increase.
It’s also important to note what this chart does not include.
These numbers are for wireless only, and do not include AT&T’s and Verizon’s sizable fiber network investments, specifically fiber-to-the-home construction that is unique to their wireline networks. Tower company capex for discretionary builds and maintenance is not included either.
This chart represents public network capex only and does not include any investments in private networks. Furthermore, the numbers do not factor in any contributions from government-funded programs such as BEAD and RDOF. And finally, vendor financing of about $4 billion that AT&T in particular is utilizing is not included.
The good news is that not including these other contributions suggests a sizable, incremental upside to the overall capex tally. The red line shows the capital intensity of wireless network investments over the forecast period. Capital intensity is calculated as capex divided by service revenues. Any percentage above 15 percent indicates network expansion and growth, which we expect to continue through the forecast period and beyond.
The 3Q22 earnings calls get underway in earnest this week. Inside Towers will be looking for revisions the MNOs may make to their prior full year capex guidance and report them accordingly.
By John Celentano, Inside Towers Business Editor