AT&T weighs in on contractor layoffs

What goes up must come down … and may go back up again. That’s the message AT&T wants its contractors to hear as some of them struggle with a sudden drop in AT&T’s wireless infrastructure spending.
“Any changes in spending activity with our vendors are typical of the ebbs and flows of our regular spending cycles,” the carrier told RCR Wireless News. More specifically, AT&T said it remains committed to Project Velocity IP, a plan to invest $8 billion in wireless infrastructure and $6 billion in wireline between 2013 and 2015. And Project VIP is just part of the carrier’s overall capital budget; AT&T says it is still on track to invest “in the $21 billion range in 2014.”
AT&T capital expenditures in the first quarter were $5.8 billion, but a $21 billion annual budget would suggest spending of $5.25 billion per quarter. So the carrier may be paring back to bring spending in line with its budget. Vendors will almost certainly be keeping a close eye on AT&T’s capex when it reports second quarter results next month. If they come in at $4.7 billion or less, AT&T will be back on track to spend $21 billion this year. But that doesn’t mean the carrier will be able to return to first quarter spending levels.
For AT&T’s contractors, the challenge is matching their own spending with that of the carrier. For example, even though AT&T may have suspended some of its spending with MasTec, the contractor remains committed to build up its workforce to support AT&T. During MasTec’s first quarter earnings call, CEO Jose Ramon Mas reminded investors that MasTec was “recently awarded a contract to provide dedicated crews to our largest customer. That contract requires us to provide 212 crews by year-end. We are in the process of ramping and while short-term this aggressive ramp will pressure margins, longer-term we’re very bullish on our ability to deliver strong revenue growth, with improving margins.”
MasTec participates in the Tower Crew Augmentation Program, which guarantees partial payment to crews even when AT&T does not have work for them. But not all MasTec crews working on AT&T projects are part of TCAP. Last week MasTec had to release 15 construction managers and project coordinators who are not part of TCAP, according to Ron Deese of TelForce Group.
AT&T’s spending cuts are having a big impact in a few markets, but the carrier remains very active in many parts of the country. “AT&T, I will tell you, remains very busy, on a variety of fronts,” said SBA Communications CEO Jeff Stoops, adding that in his opinion, the worries about AT&T spending cuts are “a bit overblown.”
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