VZ vs ATT gap October 23 24 230Verizon wireless pulled up earnings, AT&T media held back profits. Both cut back capital spending, once more proving the "High cost of 5G" is a myth. Meanwhile, the prices of wireless service in the U.S. are going up as competition weakens.

The stock market response was extreme. By the end of the day, AT&T was down 8%, about US$20 billion. During the last year, Verizon is up 17% and AT&T down 13%. The difference is about US$60 billion. AT&T clearly overpaid for DirecTV & TimeWarner, given the realities of the business, but I wouldn't estimate US$60 billion.

Craig Moffett's take is that AT&T (and Sprint) are in thrall to the bondholders while Verizon and T-Mobile are delivering growth because that's what the stock market demands. His analysis today was devastating, including speculation T might have to cut the dividend for the first time in 30 years. "AT&T is prioritizing margins and cash flow over revenue and subscriber growth. ...Virtually every single part of legacy AT&T is shrinking. There are holes in every part of the story."

AT&T, as I previously reported, has backed off on the 5G mmWave. In a few weeks, they will make a flashy announcement but now say mmWave will only be for "hotspots." Other than that, T is adopting mid-band, 70%-90% slower. 

Verizon is also slowing investment. It now says capital spending will be the lowest in five years or more, dropping below US$17 billion. While that's a great deal of money, it's only 13% of revenues, less than most telcos are spending. VZ will not be raising capex for 5G. CFO Matt Ellis, "CapEx will stay within reasonable bounds of what you've seen from us in the past."

Verizon's mmWave is the most advanced wireless network in the world. But they are going slowly, not expecting much in 2019. "I would expect that that would start to have an impact on consolidated revenues as we get into 2020 and beyond." Ellis didn't detail his plans for self-installs, but they will happen despite the mmWave indoor problems.

Important note to Washington. Ellis doesn't think Pai's new small cell rules will make a difference, "On the 5G rollout, certainly we were glad to see the FCC rules around the small cell adoption. Doesn't necessarily increase the velocity that we see. Our teams have been engaged with municipalities across the country on getting permits to put up small cells, whether for 4G or 5G. Certainly like the fact that they are providing a little more guidance for how quickly that should happen, but I don't see it having a material impact to our buildout plans. We are going as fast as we can."  

Pai's people in the D.C. bubble didn't call the companies and ask what the real effect would be.