AT&T, China Mobile Lead 4G Wireless Spending Crusade

If money were water, providers of telecommunications gear and services might all be building arks.

A November announcement from AT&T (T) opened the gates to a spending flood of near-biblical proportions among telecom service providers.

AT&T's Project Velocity IP committed $14 billion within three years, spread over wireless and wireline broadband network improvements, with $8 billion funneled into its 4G wireless rollout.

The project is expected to boost AT&T's overall capital expenditures to $22 billion for each of the next three years, up from $19.7 billion in 2012.

"This is a major commitment to invest in 21st century communications infrastructure for the United States and bring high-speed Internet connectivity — 4G LTE mobile and wireline IP broadband — to millions more Americans," AT&T CEO Randall Stephenson said in a statement. "We have the opportunity to improve AT&T's revenue growth and cost structure for years to come."

In December, Deutsche Telekom followed suit with a $39 billion, three-year spending plan. Much of that cash flow is slated for its merging T-Mobile USA and MetroPCS Communications (PCS) units.
Not to be outdone, the world's largest mobile operator by revenue and subscribers, China Mobile (CHL), on March 14 outlined an aggressive next-generation wireless network buildout.

It plans to pour $6.7 billion into rolling out a latest generation network this year. The blueprint includes expanding its number of base stations for that network to 200,000 in 13 cities by the end of this year, up from 20,000 at the end of December.

China Mobile's 4G wireless investments are just one corner of its $30 billion spending budget for 2013, a 52% increase over 2012.

What is triggering all this spending now? Global demand for high-speed Internet services from increasingly mobile consumers living their lives through data-hungry smartphones and tablets. The catch-basin for dollars spent on that infrastructure buildout is the telecom gear industry.
"On a global basis, it's a healthy time for the industry," said IHS analyst Jagdish Rebello. "The carriers are guiding the capex spending for a couple of years out."

Group Rises, Leaders Base

Collectively, the 36 stocks in IBD's telecom infrastructure industry group are up 10% so far this year. The group on Friday ranked No. 36 out of 197 industries tracked by IBD, up from No. 125.
But stock behaviors within the group vary widely.
Sweden-based Ericsson (ERIC), far and away the largest company in the group with a market capitalization of more than $41 billion, is up 25% year-to-date through Thursday and trades just below 13.