Report: Another drop in telecom capex in 2010

Fri, 11/20/2009 - 7:30am
Brian Santo

All indications are that by the end of the year, 2009 will be the first time in five years that capital expenditures (capex) on telecommunications equipment will have declined. Next year should be more of the same; spending should start rebounding in 2011, however.

The numbers are care of Infonetics, which is projecting the 2009 decline will end up to be at most 6 percent. A possible year-end bump in spending could ameliorate the decline.

“Global telecom service provider capital expenditures hit a plateau in 2008, marking the end of a 5-year investment cycle and the beginning of a 3-year disinvestment cycle, albeit a less dramatic one than what followed the great telecom crash of 2000,” according to Infonetics principal analyst Stéphane Téral.

CAPEX Worldwide“Capex will bottom down in 2010, and a new investment cycle will start in 2011, driven by 3G rollouts in India and Central and Latin America, the start of 3G rollouts in Africa, and a ramp-up in LTE deployments in Australia, Brazil, Western Europe, Japan and North America,” Téral continued.

In its latest “Service Provider Capex, Opex, ARPU and Subscribers” report, Infonetics calculates that service providers worldwide spent $305 billion in 2008 on capital expenditure projects, such as network infrastructure upgrades.

Global capex is forecast to decline at most 6 percent in 2009, mainly due to a significant capex shakeout in the Middle East and Africa, a weakening U.S. dollar, expected declines in the Brazilian real and Mexican peso, and delays in U.S. broadband stimulus funding.

Optical network hardware is a bright spot in today’s tightened capex environment, with decent single-digit percent spending growth expected in 2009 despite currency devaluations, Infonetics found.

Mainly due to currency effects, worldwide service provider revenue is forecast to decline only very slightly in 2009, to $1.67 trillion, driven by mobile communications services as consumers continue to hold on to their mobile services during tough economic times.

Mobile infrastructure will continue to dominate total global telecom and datacom spending, followed by voice equipment.

The world's 10 largest service providers, ranked in order by 2008 revenue, are AT&T, NTT, Verizon, Deutsche Telekom, France Télécom, Vodafone, China Mobile, Telefónica, BT and Sprint.

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•  Report: Another drop in telecom capex in 2010
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