AT&T Spending May Top $21 Billion, Tower Industry to Benefit

After a brief scare of contractor layoffs and AT&T tightening the purse strings, analysts are reporting that AT&T may end up surpassing its stated intention of $21 billion in capital spending this year, as it becomes more comfortable with its cash position. Barclays U.S. telecom analyst Amir Rozwadowski today reiterates an Equal Weight rating on shares of AT&T, and a $35 price target because of this reason. According to Barrons, “That could be beneficial to tower owners such as SBA Communications and Crown Castle International. The tower stocks have been among notable underperformers, even relative to the overall underperformance of the telecom group, writes Rozwadowski, with the stocks up just 0.6% last week, relative to the 1.2% gain in the Standard & Poor‘s 500index. Rozwadowski notes that ‘increasing questions have arisen’ in recent weeks about the ‘pace and trajectory of AT&T’s spending.’ But, ‘Overall our checks suggest that the broader drivers of intensified competition and rising bandwidth growth should continue to govern decisions on spending – which we expect to remain at heightened levels for at least the foreseeable future.’ Beyond the competitive aspect, it’s possible that ‘the combination of the recent DIRECTV deal, potentially beneficial tax legislation and the ability to monetize rising handset receivables may give rising visibility on the cash position, thereby possibly providing comfort on moving forward with key spending initiatives,’ he writes. AT&T shares yesterday rose 18 cents, or half a percent, to close at $36.02. Shares of Crown Castle closed down 24 cents, or 0.3%, at $73.92. Shares of SBA closed down 36 cents, or 0.4%, at $101.37.”