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CapEx in hand

Monday, 10 September 2007

Carriers to invest US$225bn and earn US$1.248tn this year.

Capital expenditures of telecommunications service providers are up in every region of the world, says a new report from Infonetics Research, ‘Service Provider Capex, Opex, ARPU & Subscribers’. According to Infonetics the increase in spending is being driven by carrier network transformation and migration projects, swelling numbers of mobile and broadband subscribers, and increasing demand for personal broadband services and high bandwidth video services such as mobile TV, mobile video, IPTV, and video on demand. Meantime service provider revenue is also up in all regions, as carriers launch new services to meet the demands of hundreds of millions of worldwide subscribers. The analyst company puts service revenues at a combined US$1.2tn worldwide in 2006, up 8% from 2005, and projects a 4% increase in 2007.

“For the third year in a row, carrier CapEx has increased in all regions of the world, but we expect this investment cycle to plateau in 2009 and decrease in 2010. However, service providers in most regions are operating at a sustainable CapEx-to-revenue ratio in the 15% range, which should carry the market in these regions through the plateau without much disruption. The Asia Pacific region is worrisome, though, because the average capital intensity rate there is a high 21%, fuelled by China ’s rapid growth. If that rate doesn’t come down, we could be looking at the beginning of another telecom bubble in that region,” said Stéphane Téral, principal analyst at Infonetics Research and lead author of the report.

Other highlights from the report:
·         public service providers worldwide spent a combined US$216.2bn on CapEx in 2006, up 13% from 2005; worldwide CapEx is expected to grow 4% in 2007 to $224.6bn
·         Asia Pacific’s share of worldwide telecom CapEx spending is forecast to peak at 34% in 2007, followed by EMEA with 31% and North America with 29%, although the weak dollar has inflated these percentages
·         the four telecom and data networking equipment categories being invested in most heavily in 2006 and 2007 are mobile RAN, voice, optical, and broadband aggregation equipment
·         the world’s top 15 service providers account for roughly 50% of worldwide carrier CapEx spending
·         the top service providers that will make up more or less half of all public CapEx spending in each region in 2007 are: AT&T, Sprint Nextel, and Verizon in North America; Deutsche Telekom , France Télécom, BT, Telecom Italia, and Telefónica in EMEA; China Mobile, China Telecom, and NTT in Asia Pacific; and América Móvil, Telmex, and Telefónica in CALA

And in other big telecoms number crunching exercises, the International Telecommunications Union (ITU) has released a publication, ‘Trends in Telecommunication Reform: the Road to NGN’, that calculates that by the end of 2006 there were a total of nearly 4bn mobile and fixed line subscribers and over 1bn Internet users worldwide. This included 1.27bn fixed line subscribers and 2.68bn mobile subscribers. These numbers are even more mind-boggling when updated to include two of the fastest growing markets: China and India , which in the first quarter of 2007 had reported nearly 200mn more subscribers between them - 87mn in China , and about 110mn more in India .
John Williamson