AT&T is having to open its checkbook again to fund the expansion of U-verse TV, even as it once more cuts the number of potential subscribers who will be able to sign up for the service by the end of 2008.
The nation’s biggest phone company plans to spend $500 million more than it previously reported to build out the network underlying U-verse TV in 2007-08. At the same time, that network will reach 1 million fewer homes than AT&T had anticipated as recently as May, according to a quarterly filing Tuesday with the Securities and Exchange Commission.
The company said spending on U-verse from January 2007 to the end of 2008 will be between $4.5 billion and $5.0 billion. In May, AT&T said capital spending for the U-verse rollout for that two-year period would be $4 billion to $4.5 billion, an increase of up to $1.4 billion more than previously estimated for 2004-08.
Part of the additional $500 million in spending is earmarked for the former BellSouth territories. AT&T completed the $86 billion acquisition of BellSouth earlier this year. AT&T “will be shifting some of that capital to startup costs to expand in the initial markets in the Southeast region,” it said in the 10-Q filing.
AT&T also lowered the estimated number of homes the U-verse network will pass, from 18 million living units by the end of 2008 to 17 million. The company said it cut the estimate because “these startup activities are in preparation for, but do not immediately result in, passed living units,” according to its 10-Q.
The pullback follows similar forecast cuts for U-verse. In May, AT&T reduced estimates from 19 million homes at the end of 2008. Back in 2004, SBC Communications (which acquired AT&T two years ago) said it projected U-verse would be available to 18 million households by the end of 2007.
The slower-than-expected deployment of U-verse is even more dramatic considering that the current forecast of 17 million homes passed includes areas within the former nine-state BellSouth territory, whereas AT&T’s previous estimates were for the 13-state SBC footprint alone.
In the 10-Q filing Tuesday, AT&T also noted that “additional customer activation capital expenditures are not included in this capital spending forecast.”
Earlier this year, AT&T announced it would spend $1.1 billion over the next few years on fiber-optic network upgrades, broadband deployment and Internet technologies in three states in the Southeast U.S.: North Carolina, South Carolina and Georgia. In Texas, AT&T said it will spend nearly $1.25 billion this year on U-verse, wireless and other network infrastructure.
AT&T said U-verse TV was available to 5.5 million living units as of Sept. 30, and that it was marketing services to about 40% of those units. The company reported 126,000 U-verse TV subscribers at the end of September.