Lehman Brothers: Wireless capex to increase in 2007

Cingular may be cutting its capex budget for 2007 after completing the bulk of its AT&T Wireless network integration, but Verizon Wireless, Sprint and T-Mobile are expected to pick up the slack, according to Lehman Brothers.

Verizon is likely to take over as the capex leader in 2007, spending a projected $6.5 billion on equipment and deployments, followed by Sprint at about $6.3 billion, Lehman Brothers analyst Marcus Kupferschmidt said in a research note. Meanwhile Cingular has said it will cut its 2006 capex, projected between $7 billion and $7.5 billion by about 20% or about $1.5 billion in 2007, dropping it to third place.

Sprint and Verizon are expected to begin deploying EV-DO revision A equipment in 2007, adding to their capex costs, and Sprint will begin migrating some of its Nextel iDEN customers to CDMA increasing its overall CDMA 1X spend, adding up to a 10% boost in spending over 2006’s projected $5.7 billion outlay, Kupferschmidt said.

Even the smallest Tier I carrier will contribute to the overall capital spending trend. T-Mobile is expected to bid heavily in the Advanced Wireless Services spectrum auction this August, giving it the spectrum it needs to deploy UMTS networks. That spending will result in a massive leap in capex, from an estimated $2.9 billion in 2006 to $4 billion in 2007, Kupferschmidt said.