Project VIP capex has peaked says AT&T

AT&T has said that investment in its Project VIP network enhancement program has peaked, and that capex for 2015 will therefore shrink from current levels. The pronouncement, tacked at the end of its announcement that it has acquired Mexican wireless network operator Iusacell for $2.5 billion, sent shares of optical technology stocks tumbling today.

Project VIP is designed to upgrade AT&T's wireless and wireline networks to meet the carrier's growing capacity requirements (see "AT&T announces Project Velocity IP capex plans"). The company says its network upgrade plans are largely ahead of schedule. For example, AT&T says it has essentially finished its 4G LTE network expansion. It also has connected wired high-speed Internet service to 57 million U.S. customer locations. AT&T adds that it also has added fiber-optic network connections to 600,000 of its planned 1 million multi-tenant U.S. business locations (see, for example, "AT&T increases fiber to the building count in multiple markets").

Therefore, AT&T has confirmed previous indications that VIP-related spending reached its peak this year and that it won’t need to spend as much in capex in 2015. AT&T now estimates that 2015 capex for its existing businesses will fall in the $18 billion range, versus the $21 billion it expects to spend this year. The carrier expects the 2015 capex reduction will bring its capex to revenue ratio to the mid-teens, which it described as “consistent with its historical capital spending levels.”

The company repeated, however, that it still expects to enhance and expand its U.S. broadband access network to 15 million customer locations, primarily in rural areas, if and when its proposed acquisition of DIRECTV closes.

AT&T’s confirmation of capex reductions for 2015 follow hints that Verizon is also looking closely at its capex spending for the year (see "Verizon signals flat capex for 2015").

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