China and India lead worldwide telecom carrier capex and revenue growth

July 8, 2008

JULY 8, 2008 -- Infonetics' report projects a spike in worldwide carrier capex in 2008, followed by a plateau in 2010 and a decline in 2011, and emphasizes that the weak U.S. dollar is inflating current growth rates in Brazil, Canada, China, Europe, India, and Japan.

JULY 8, 2008 -- Communications market research firm Infonetics Research (search for Infonetics) reports that worldwide service provider capex totaled $248.8 billion in 2007, a 7% increase from 2006.

Infonetics' report, "Service Provider Capex, Opex, ARPU, and Subscribers," projects a spike in worldwide carrier capex in 2008, followed by a plateau in 2010 and a decline in 2011, and emphasizes that the weak U.S. dollar is inflating current growth rates in Brazil, Canada, China, Europe, India, and Japan.

"Our capex analysis indicates we are in the fourth year of an investment phase, and we may be reaching the plateau this year in both North America and Europe, where large service providers' capital intensity (the ratio of capex to revenue) will likely be as low as 12%. Meanwhile, China and India will drive a significant jump in carrier capex in 2008 as a result of network construction projects combined with currency appreciation against the U.S. dollar. Both countries are still posting double-digit revenue growth in their native currencies, which, converted in U.S. dollars creates a big spike in worldwide carrier revenue as well," says StÃ©phane TÃ©ral, principal analyst at Infonetics Research.

Other highlights from the report include:

Telecom service providers earned a combined $1.5 trillion in annual worldwide revenue in 2007, up 10% from 2006, with currency appreciation making up the bulk of the growth, while the rest came from wireless services.
Carriers are increasingly investing in application software (versus hardware) for media-rich applications such as content, storage, and security for broadband-based wireline and wireless services.
Current investment drivers for carrier spending: convergence between IT, media, Internet, and telecom, which is adding new competitive pressures to carriers, and the shift from legacy TDM to next-generation IP networks.
The world's 10 largest service providers (ranked by 2007 revenue) are AT&T, Verizon, NTT, Deutsche Telekom, France TÃ©lÃ©com, Vodafone, TelefÃ³nica, China Mobile, BT, and Sprint.
The next largest service providers include Telecom Italia, Comcast, and KDDI, which, according to their most recent growth rates, are poised to join the top 10.
The incumbent share of North American carrier capex jumped from 56% to 63% in 2007; MSOs are expected to increase their share of North American carrier capex by 2011.
The Asia Pacific telecom industry is squeezed between two opposite market forces: a saturated market made of Australia, Hong Kong, Japan, South Korea, Singapore, and Taiwan characterized by flat to decreasing capex, and a fast growing market driven by China and India, characterized by double digit growth for both capex and revenue.
Caribbean and Latin America (CALA) service provider revenue jumped 29% between 2006 and 2007.
Mobile infrastructure makes up the bulk of total equipment capex in 2007, accounting for about 20%, followed by voice infrastructure, optical equipment, and broadband aggregation equipment.

Infonetics' report tracks revenue, capex, capex-to-revenue ratios, opex, ARPU, subscribers, and access lines of 154 public and semi-private/government-owned service providers. The report includes actual data and forecasts, market drivers, analysis, service provider demographics, and pivot tables for customizing analysis with data viewable by service provider, service provider type, and equipment category.

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