Verizon confirms climb-down from C-band capex peak

Verizon will spend less this year than it did in the past two, having passed the peak of 5G investment, it confirmed at its full-year results announcement this week.

The US telco presented a set of numbers that showed improvements at its mobile business in terms of the closely-watched phone customer additions metric, but it remains some way behind its big rivals and the figures clearly show that its enterprise unit is propping up consumer. Its fixed wireless business appears to be flying though, which will give it some cause to cheer.

Not that CEO Hans Vestberg gave any indication of being anything other than upbeat about the results, of course.

“We are rapidly building out our C-Band spectrum with the most aggressive network deployment in our company’s history and are well positioned to improve and accelerate our performance,” Vestberg said. “Wireless mobility and nationwide broadband will be two of the most significant contributors to our growth for the next several years.”

Given how much it has spent on C-band, Verizon cannot afford to let those growth opportunities pass it by.

The telco’s capital expenditure for full-year 2022 came in at a sizeable US$23.1 billion, including $6.2 billion spent on the rollout of 5G network using C-band spectrum. The total was up by $2.8 billion on 2021, when C-band spend accounted for $2.1 billion of the $20.3 billion final reckoning; as such Verizon was keen to point out that its ‘business-as-usual’ capex actually declined last year.

“C-Band-related investments peaked in 2022, and we expect capital intensity to begin to decline in 2023 with less than $1.8 billion remaining to complete the incremental $10 billion of C-Band-related capital spending that we announced at our 2021 investor day,” the operator said.

To be slightly more specific, its 2023 guidance includes a capex projection in the $18.25 billion-$19.25 billion range, including $1.75 billion in remaining C-band spend.

Even at the top end of that range, that’s $3.85 billion less than last year, and looks set to fall further.

As Bloomberg reported earlier this month, speaking at the Citi 2023 Communications, Media & Entertainment Conference, Vestberg put 2024 capex at around the $17 billion mark, by which point Verizon will have “the lowest capital intensity in the industry, in the world,” relative to revenue, he said. Time will tell on that point.

Verizon’s capex trajectory follows a trend highlighted by Dell’Oro Group last week. The analyst firm predicts a flat global RAN market in the coming years, despite the fact that operators are still spending on 5G, noting that telcos in the more advanced 5G markets are passing the peak of investment. That’s certainly the case for Verizon rival T-Mobile US, which also saw 2022 as the height of its 5G spend.

Speaking of whom, T-Mobile recently reported stellar operational figures for 2022, getting in ahead of its official results announcement to capture itself some headlines. We suspected then that it was correct in its assertion that its 3.1 million postpaid phone net customer additions for the year were industry-leading, and Verizon’s numbers have only served to back that up.

Verizon’s Q4 numbers were better than those it published in previous quarters, postpaid phone net additions coming in at 217,000. But the figure was less than half that it achieved in the year-ago quarter and was unable to make up for the first three quarters of a dismal 2022; it’s full-year postpaid phone net adds were just 201,000.

To make matters worse, just 41,000 of the Q4 net adds were from the consumer space, the remaining four fifths being enterprise customers.

AT&T has yet to share Q4 figures, but will likely beat that number, underlining the fact that Verizon still has a lot to do to regain serious momentum in the consumer mobile market.

Its foray into fixed wireless access is helping, although it categorises its FWA offerings as broadband, rather than mobile.

Verizon added 776,000 FWA customers during 2022, with net adds growing quarter-on-quarter; its net additions in Q4 were 379,000, significantly more than the 37,000 net adds it recorded for FiOS and DSL. Its year-end FWA customer base numbered 884,000, so it is surely shooting to pass the million mark this quarter.

All good stuff, but ultimately Verizon is not going to monetise those 5G investments – let’s not forget we’re talking $53 billion for spectrum and $10 billion in capex, and that’s just C-band – through FWA alone. It may feel it has turned a corner in consumer mobile, but there’s still plenty of work to do.

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