American telecom major AT&T (NYSE: T) is set to pump USD 10 billion into growing its global business solution arm. The multinational firm is looking to drive growth in the wireless connectivity, cloud storage and corporate security solutions space.
Capex to rise in 2016 for AT&T
In a statement made on Sunday, the firm went on record to say that they are looking at a total capital expenditure of USD 22 billion in the year ahead. Of this, USD 10.6 billion is likely to go towards the acquisition of new airwaves. USD 11 billion in divided and USD 6.5 billion in debt maturities are also anticipated.
The business solutions unit of the telecom company saw its revenues drop at the close of the year 2015, with the quarter results dipping by 2.7 percent compared to the quarter ended December 31, 2014. This unit of AT&T raked in USD 18.2 billion in revenues; the company’s revenues for Q4 clocked in at USD 42.1 billion. The fall in numbers is being attributed to a combination of foreign exchange rates putting pressure, as well as a fall in equipment revenues.
While rivals lower their outlay
While AT&T grew their planned investment on capital spending or Capex, to USD 22 billion in 2016, from the USD 20.7 billion of 2015, fellow US firm and competitor Verizon, actually lowered their Capex for the year ahead. Softbank promoted Sprint has lined up USD 5 billion in investments for the fiscal ending March 31, 2016.
AT&T invests in DIRECTV
AT&T had capital spending of USD 21.4 billion in 2014, before a dip in 2015. The higher outlay by AT&T will also be used towards investments in DirectTV. In a recent change of direction, AT&T had decided to defocus from the U-verse TV service and instead train their sights on the DirectTV business. The telecom major had acquired DirectTV with a view to making USD 2.5 billion of cost savings each year through the move. DirecTV benefited with the move, acquiring 214,000 customers, even as customers moved away from U-verse. However, some of this base were lost to Comcast as well which saw one of its biggest gains in several years.
As AT&T faces pressure to deliver better profit margins in the face of a relentless price war in the wirless space, DirecTV could be just what the multinational needs. And all the while also making strides towards stronger credit rating.