The rollout of 5G wireless service is still in its early phases, but two of the four largest U.S. carriers have already ramped up their capital spending in order to deliver next-generation speeds.
Combined, the four operators recorded total capital expenditures of $55.71 billion during calendar year 2018, up from $53.72 billion in 2017, according to S&P Global Market Intelligence data. These expenditures include any cash spent to maintain, improve or construct operators' networks, including interest. Among the carriers, the biggest year-over-year jump came from Sprint Corp., which reported capex of $12.26 billion for the year, up from $9.68 billion in 2017. T-Mobile US Inc. also saw an increase in capital spending, while AT&T Inc. and Verizon Communications Inc. both saw a year-over-year decrease.
While the number of 5G markets remains relatively limited at this point, all of the operators said recently that they are making the necessary investments both to deliver faster 4G LTE speeds in the near-term and to pave the way for widespread 5G deployment in the coming years.
Sprint doubled its network-related capex year-over-year in the last three months of 2018 as it put more of its spectrum to use and deployed "thousands" of small cells, the cellular base stations and antennas used to make networks denser in 5G build-outs.
"We … now have 27,000 small cells on air compared to only 3,000 this time last year," Sprint CEO Michel Combes said during Sprint's most recent earnings conference call, noting that the company is using a range of different technologies to make the rollout as quick and cost-efficient as possible.
While Sprint is currently using these small cells to deliver faster LTE speeds, Combes said they will also play an important role in Sprint's 5G plans. The hardware Sprint is deploying can be upgraded with software to support 5G service, "allowing us to fully utilize our spectrum for both LTE and 5G simultaneously while we enhance capacity even further with 5G and begin to support new 5G use cases," Combes said.
Sprint expects to launch mobile 5G service in nine markets in the first half of 2019.
T-Mobile's capex in 2018 rose to $5.54 billion, up from $5.24 billion in 2017. T-Mobile executives attributed the increase to the deployment of the nationwide low-band spectrum T-Mobile acquired in 2017 during the 600 MHz auction.
"Our engineering team is hard at work, furiously building out our 600 MHz [spectrum] and setting the stage for America's first real nationwide 5G network next year," T-Mobile CEO John Legere said during the company's earnings conference call.
In 2019, T-Mobile expects capex to increase again, ranging between $5.8 billion to $6.1 billion, including expenditures for 600 MHz and 5G deployment. And much of this spending will occur in the first half of the year.
"Similar to prior years, we expect cash capex to be front-end-loaded with Q1 2019 in the range of $1.7 billion to $1.9 billion," T-Mobile CFO Braxton Carter said during the call.
T-Mobile has 5G equipment deployed in six of the top 10 U.S. markets, including New York and Los Angeles, and it plans to begin offering 5G service as 5G smartphones become available in the first half of the year.
AT&T reported a slight decrease in capital spending in 2018 at $21.25 billion, down from $21.55 billion in 2017. AT&T's 2018 capex figure, however, does not include more than $1 billion in capital spending reimbursed for the deployment of FirstNet, a dedicated network core for first responders.
Including that money, AT&T CFO John Stephens said the company recorded "near-record" capital spending of almost $23 billion in 2018, and it expects to do the same again in 2019. The company said it will focus those investments on fiber, 5G and FirstNet.
AT&T ended 2018 with 5G service launched in 12 markets, and seven more market launches are slated for early 2019. The company also plans to have nationwide mobile 5G coverage by early 2020.
Verizon reported 2018 capex of $16.66 billion, down from $17.25 billion, though it expects capex to increase from 2018 to a range of $17 billion to $18 billion. This range, according to Verizon CFO Matt Ellis, includes Verizon's expanded commercial launch of 5G and is "consistent with historic levels."
Verizon ended 2018 with pre-standard 5G home broadband service in four markets. The service relies on an internal specification known as the Verizon 5G Technology Forum network standard, rather than the 5G New Radio global standard. The company plans to roll out standards-based 5G mobile service in 2019.
Verizon CEO Hans Vestberg said during an earnings conference call that Verizon has been laying the groundwork for 5G "for years" with its capital spending.
"So we [have] actually been for several years investing ... to be prepared for the 5G, and this is included in the capex guidance for this year," the CEO said.