Published November 07, 2012
AT&T Inc said on Wednesday it would increase its capital spending to $22 billion a year for the next three years from its 2012 budget of $19 billion to $20 billion to fund upgrades to its wireless and wireline networks.
The company said it decided to upgrade its wireline network over other options it considered including separating wireline from the rest of AT&T or divesting parts of the network. It had said it was considering selling some rural phone lines.
"This gives us the opportunity to improve our top line growth and change our cost structure," Chief Executive Randall Stephenson told analysts at an AT&T event in New York.
The company's network expansion plans call for a budget of $8 billion for expanding its wireless network and $6 billion for upgrading its wireline network, the company said.
The investment plan calls for capital spending to increase to the high end of the mid-teen percentage range of revenue for the next two years with spending returning to normal levels in 2015, according to AT&T.
It also said it would tap debt markets to take advantage of historically low interest rates. As a result it expects its ratio of net debt to earnings before interest, tax, depreciation and amortization to increase to the 1.8 range over the next two years from 1.42 at the end of the third quarter.
Under its upgrade plan, AT&T said it would upgrade its wireline network with fiber to reach another one million business customers and would provide high-speed Internet services to 75 percent of its wireline customer locations.
It will expand its U-verse services, which include high-speed Internet and television services, by a third to cover 43 percent of its network by the end of 2015.
The upgrade plans also include an extension of AT&T's high-speed wireless network based on Long Term Evolution to cover 300 million people by the end of 2014. Its previous plan called for coverage of 250 million people by the end of 2013.
The company also forecast earnings per share growth in the mid-single-digit percentage range for the next three years and raised its quarterly dividend to 45 cents per share from 44 cents.
AT&T shares fell 3 percent to $33.74 in morning trading on the New York Stock Exchange after the news.
(Reporting by Sinead Carew in New York; Editing by Gerald E. McCormick and James Dalgleish)