AT&T Desperately Needs to Keep its CAPEX Up

Implications: 1.      AT&T understands that it cannot afford to let its CAPEX slide very much.   2.      It does not have the luxury of being able to delay a major project six months to a year.   3.      If it does cut back in any substantial way for a prolonged period of time, the results could be as severe as fines from the state regulatory community for not providing adequate service in certain areas of its territory.

Analysis:  AT&T may strive to farm out as much of its U-verse build-out as possible to save money on installations.  It has been cutting back on traveling expenses and training. They are also looking at reducing overtime.  There are no frills in the office place.  But in general, the RBOC has a lot of cases in which it has difficult problems because it has not kept up with the necessary network construction in the last couple of years.  Especially in situations in which there are severe shortages, cutting the CAPEX would only create additional harm.   

Coming out of the bubble, much of the AT&T network was in pretty rough shape.  The former CEO’s spending spree on acquisitions set them back even further because of less available capital.  AT&T is still facing challenges merging the three networks together.  And it needs to get caught up in dealing with unresolved issues going back to the old Ameritech and Pac Bell days.   

So, despite a slowing economy, there will be at most a very small pinch on AT&T’s CAPEX budget.