Telcos predicted to restart capex in 2010 as economy improves

20 Nov 2009

After investment in telecoms infrastructure by carriers began to plateau in 2008 and then dramatically plummet in 2009, capital spend (capex) is predicted to bottom out in 2010 and a new investment cycle will begin in 2011.

A study by Infonetics Research into how current economic conditions have affected the telecoms industry revealed that global capex is forecast to decline at most 6pc in 2009, mainly due to a significant capex shakeout in the Middle East and Africa, a weakening US dollar, expected declines in the Brazilian real and Mexican peso and delays in US broadband stimulus funding.

“Global telecom service-provider capital expenditures hit a plateau in 2008, marking the end of a five-year investment cycle and the beginning of a three-year disinvestment cycle, albeit a less dramatic one than what followed the great telecom crash of 2000,” said Stéphane Téral, principal analyst for mobile and FMC infrastructure at Infonetics Research.

“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,” predicted Téral.

Bump anticipation

Infonetics anticipated a year-end bump up in capex, which could bring the overall capex decline in 2009 to less than 6pc.

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.

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-communication 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 data comms 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.

By John Kennedy

Photo: Global capex is forecast to decline at most 6pc in 2009, a study by Infonetics Research suggests.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years