AT&T Slowdown Sends a Shudder Through the Industry

July 2, 2014

By J. Sharpe Smith —

A slowdown, or freeze as some have called it, in wireless infrastructure build out at AT&T has the industry nervous. Little more than a month after AT&T announced it would build 1,500 to 3,000 towers a year for the foreseeable future, the telecom giant has slowed its deployment.

Wireless staffing services companies, tower companies and communications contractors are reporting deferrals of planned work that is costing them money and jobs. Some blame the proposed merger with DirecTV, but most are unsure about the changes.

CTI Towers, for example, has seen a slowdown from a leasing standpoint with AT&T putting some sites on hold, but Tony Peduto, company CEO, is not worried.

“Sites scheduled for late 2014, early 2015, appear to be on hold right now,” he said. “I don’t think they are going away. I think it is just a temporary delay, not a cancellation. They are still moving forward on sites scheduled for Q2 and Q3 of this year.”

MasTec’s stock has been under pressure because of the published reports of deferrals and reductions of wireless project spending, causing the company to convene a conference call to explain the effect of the slowdown on its bottom line.

“We have determined that delays in wireless spending will negatively affect second-quarter results, so we felt it was important to share this information with our stakeholders,” Jose Mas, MasTec CEO, said on the conference call.

MasTec, which was just recognized in May as a top AT&T supplier, now anticipates reduced levels of second-quarter wireless project revenues, as various planned projects have been deferred or reduced in scope. Second-quarter communication segment revenues will be $45 million to $50 million less than prior expectations.

“We had previously expected second-quarter revenues to grow at a similar pace to the first quarter,” Mas said. “We have been notified that many projects for the May to June period have been deferred or delayed. As a consequence, while we still expect our wireless revenue to increase, we now expect the increase to be in the mid-single-digit range compared to last year.”

To put things in perspective, MasTec’s communications revenue for the first quarter 2014 was $447 million versus $425 million last year, which was driven by a 27 percent increase in its wireless business, offset by declines in both its installation business and its wireline business.

Although MasTec expects second-quarter revenue to be less than expected, and the outlook for the second half of 2014 is “cloudy,” Mas was upbeat on the long-term view.

“While we are being negatively impacted by real-time, short-term changes in our wireless business, our long-term outlook remains extremely positive,” Mas said. “Across all of our business, we are enjoying very active levels of opportunities, which we believe will provide substantial growth in the markets we serve. The fundamentals that will drive this growth remain in place.”

One apparent victim of the AT&T slowdown is MasTec’s investment in its tower crew augmentation program’s training and development costs. Although it will continue work on its tower crew program, the ramp up of tower crews in this program will likely be deferred for the balance of 2014.

“We are steadfast in our belief that the capabilities of our tower crews are key to our success in the wireless marketplace,” Mas said.