Cingular's Cap-Ex May Drop 20% in '07, Lehman Says
Cingular Wireless Inc., the largest U.S. mobile-phone carrier, will probably reduce its capital spending by as much as 20 percent next year as the company slows the pace of network upgrades, Lehman Brothers Holdings Inc. said.
Spending by Cingular will drop from the $7.5 billion anticipated in 2006, Blake Bath, an analyst at Lehman in Washington, said in a note to clients today, citing conversations with Cingular management.
Cingular is nearing the completion of the upgrade of its network to third-generation technology, enabling high-speed Internet connections and allowing more data traffic. The company is also near the end of integrating its systems with those of AT&T Wireless Services Inc., which Atlanta-based Cingular bought for $41 billion in October 2004.
Cingular already indicated it will slow spending. Chief Financial Officer Peter Ritcher in January said the company will spend $7 billion to $7.5 billion this year on network upgrades, then reduce outlays starting in 2007. Cingular spent $7.48 billion on upgrades in 2005, including so-called third-generation broadband wireless services that were introduced in 16 cities.
The decline may be offset by T-Mobile USA Inc., Sprint Nextel Corp. and Verizon Communications Inc., which will probably increase spending, Blake said. This should lead to overall growth in U.S. wireless industry capital spending of 2 percent to 4 percent to about $27.5 billion in 2007, he said.
Cingular is a joint venture between AT&T Inc. (T) and BellSouth Corp. Shares of San Antonio-based AT&T rose 9 cents to $27.66, allowing for the payment of a 33.25 cent dividend, at 4:01 p.m. in New York Stock Exchange composite trading. Atlanta-based BellSouth rose 10 cents to $36.29.
Santa Ana, California-based Powerwave shares fell 20 cents to $8.88 in Nasdaq Stock Market composite trading. Naperville, Illinois-based Tellabs rose 28 cents to $13.26, and Eden Prairie, Minnesota-based ADC rose 15 cents to $16.36.
Clay Owen, a spokesman for Cingular, said he didn't have an immediate comment. Lu Johnson, a spokeswoman for ADC, wasn't available to comment. Calls to Powerwave's investor relations department weren't immediately returned.
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