Verizon Projects Wireless CapEx Slowdown as 5G Network Builds Stabilize

Verizon’s (NYSE: VZ) big bet on C-band spectrum is about to pay off. The company went live on January 19, with cell sites using mid-band C-band (3.7-3.98 GHz) spectrum in the top 46 U.S. markets or partial economic areas (PEAs) as the FCC designates them. With this deployment, Verizon provides its 5G Ultra-Wideband (UWB) service to around 95 million people, nearly 30 percent of the U.S. population, in millions of homes in more than 1,700 cities.

Verizon’s deployment completes Phase I of the Auction 107 fulfillment requirements. The 280 MHz of C-band spectrum allocated for 5G was made available in 20 MHz blocks (5 A-Blocks, 5 B-Blocks and 4 C-Blocks). The A-Block holders, namely Verizon with 60 MHz of A1, A2 and A3 blocks and AT&T with 40 MHz of A4 and A5 blocks, were required to activate those licenses in the top 46 PEAs by December 5, 2021. The remaining A-, B-, and C-Block licenses held by all winning bidders must be activated by December 5, 2023. 

Both companies agreed to delay their A-Block activations until January 5, 2022, in response to the FAA and aviation industry concerns that C-band would interfere with aircraft radar altimeters, as reported extensively by Inside Towers. After another two-week delay, both companies turned up 5G on C-band on January 19.

The C-band build out has significant implications for the wireless infrastructure business. Normally, both companies simply report a consolidated capex figure with no breakout for their respective wireless, wireline, media and corporate operations.

At the conclusion of Auction 107, however, both companies indicated a capex amount that is incremental to what Verizon refers to as its “business as usual” or BAU capex. The company budgeted $10 billion for C-band buildout over three years while AT&T indicated a $6-8 billion level. These incremental levels raised an already elevated level of wireless network investment across the industry.

For full-year 2021, Verizon reported its consolidated BAU capex was $18.2 billion along with an incremental $2.1 billion for C-band. Of the total BAU capex, wireless accounted for an estimated $12.7 billion for a total wireless network spend of $14.8 billion, substantially higher than the estimated $12.0 billion spent in 2020.

Verizon’s guidance for its wireless capex over the next two years is interesting. The company expects full-year 2022 consolidated capex, excluding C-band, to be between $16.5-17.5 billion, a nearly 7 percent decline from $18.2 billion in 2021. Wireless BAU capex is estimated at $11-12 billion. 

As Matt Ellis, Verizon CFO put it, “… we have started our progress towards lower capital intensity.” Wireless capital intensity for 2021 was 18 percent and likely will drop to 15-16 percent in 2022. Ellis points out that 5G Nationwide and 5G UWB macrocell and small cell investments are being handled more efficiently and capex for the established 4G network is being reduced as 5G takes up the traffic load.

Verizon is projecting C-band capex of $5-6 billion for 2022, while it continues to build out the initial 46 PEAs and prepares sites for Phase II deployments across the country by the 2023 deadline.

In 2023, the company will spend the $2.0 billion balance of its $10 billion C-band budget to complete the Phase II buildout. In subsequent years, Verizon notes that C-band investments will be part of the BAU wireless capex allocation. That figure likely will trend towards the $9-10 billion annual wireless capex level that Verizon has exhibited in the past.

By John Celentano, Inside Towers Business Editor

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