Infonetics Research: Worldwide telecom carrier capex to hit $225 billion in 2007

AUGUST 30, 2007 -- Capital expenditures of telecom service providers are up in every region of the world, 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, claims a new report from Infonetics Research (search for Infonetics Research).

Service provider revenue also is up in all regions, as carriers launch new services to meet the demands of hundreds of millions of worldwide subscribers, the report shows.

"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," asserts Stéphane Téral, principal analyst at Infonetics Research and lead author of the report. "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%, fueled 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," he notes.

The report also finds that:

Public service providers worldwide spent a combined $216.2 billion on capex in 2006, up 13% from 2005; worldwide capex is expected to grow 4% in 2007 to $224.6 billion.

Service providers earned a combined $1.2 trillion in annual worldwide revenue in 2006, up 8% from 2005, and are expected to increase their revenue 4% by 2007.

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:• 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.

Infonetics' "Service Provider Capex, Opex, ARPU & Subscribers" report tracks revenue, capex, capex-to-revenue ratios, opex, ARPU, subscribers, and access lines of public and semi-private/government-owned service providers.

Visit Infonetics Research