Equipment Manufacturers Are Singing the Blues

After the four major carriers released their third quarter earnings reports, the stocks of telecom equipment manufacturers plummeted due to one main reason. That factor was AT&T’s announcement that they will decrease their capex next year by 14%.For example, after Cisco reported their earnings, the company’s stock rose slightly but fell 1 percent after AT&T’s decision to slow spending. “Service provider is the big challenge…that’s due to two to three U.S. service providers who have dramatically slowed the order rates with us,” Chief Executive John Chambers said on the quarterly conference call. Continue reading here. 

AT&T to Tighten Purse Strings

The rumor circulating for the past few months was that AT&T had cut back the spending for their wireless networks; however, this was never confirmed. Some companies saw a little pull back from AT&T, while others didn’t see any change. Jennifer Fritzsche, Senior Analyst at Wells Fargo, reported that AT&T announced they would cut spending in 2015. They will likely spend $18 billion in 2015, down from $21 billion in 2014. This bit of news might alarm the members of the tower industry, but Fritzsche and her team believe that AT&T will continue to spend on capacity and improving the overall wireless network experience for its customers.“Also keep in mind that a major part of AT&T’s future LTE strategy is the deployment of its 30MHz WCS (2.3 GHZ),” Fitzsche notes. Continue reading here.

Ericsson CEO Not Worried

Hans Vestberg, CEO of Ericsson, isn’t worried about the future of networks in North America despite slower deployment during the third quarter. “Some operators in North America might have been optimizing their cash flow, but our position hasn’t changed,” said Ericsson CEO Hans Vestberg at a conference in Stockholm. “I don’t see any change in the long-term demand in North America. It’s still the most innovative market in terms of technology. It’s still seeing the most demand. It’s the most innovative market when it comes to new phones.” Continue reading here. 

SBA is Solid

Even though Crown Castle and American Tower get the majority of the attention in the tower world, SBA Communications shouldn’t be forgotten. This week, SBA reported their third quarter earnings ahead of expectations. Colby Synesael at Cowen and Company wrote in a research note, “SBAC posted solid 3Q14 results and provided a solid initial 2015 outlook that lacks the outsized ‘acquired networks’ churn that Crown expects. As such, we expect the stock to benefit from a bit of a relief rally today after trading down ~3% the last three days. Reiterate Outperform.” On the conference call yesterday morning, the tower company noted the four major wireless carriers contributed to more than 80% of incremental leasing revenue, and expects solid network build activity from Verizon and T-Mobile. Continue reading here. 

VoLTE: Coming Soon

Verizon Communications and AT&T expect to transmit wireless voice calls between the two carriers over high-speed data networks by 2015, according to Reuters. Instead of switching from 4G LTE when texting or using data to 3G to make calls, the call will be transmitted using Voice over LTE, which repackages voice calls as data and transmits them over carriers’ high-speed data networks.“Interoperability among all VoLTE providers takes connectivity to the next level with HD quality voice and additional features that customers want,” Tony Melone, chief technology officer at Verizon, said in a statement. Continue reading here. 

Tower Growth Up, Equipment Providers Still Struggling

Last week, American Tower and Crown Castle International reported their third quarter earnings announced that revenue growth and carrier activity remained strong. Even though the tower companies seem to be doing well, Jennifer Fritzsche, Senior Analyst at Wells Fargo, wrote in a research note, “ We have gotten a lot of questions on wireless spending. While the towers have reported decent growth thus far (excluding the decommissioned contracts from CCI), the equipment providers seem to be struggling and talking somewhat bearishly regarding the outlook for North American spending. Investors are wondering when and if this will impact the tower companies’ revenue growth. Continue reading here.

Wireless: Full Speed Ahead

The wireless carriers seem to be moving full speed ahead with their network enhancements, build outs, and small cell deployments. This was made clear during American Tower’s third quarter earnings release last week noting their domestic and international growth was attributed to carrier network investment. “Elevated wireless CapEx spend in the U.S. led to strong growth in the quarter and wireless network initiatives by large multinational carriers in our other markets allowed us to post solid results internationally as well. As a result, we are raising our full year 2014 outlook for all of our key metrics,” Tom Bartlett, Executive Vice President and CFO at American Tower, explained. Continue reading here.