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Telecom Service Provider Capex to Increase to USD 236 bln in 2009

By Sophia Mayengbam

For the third year in a row, telecom service providers worldwide increased their capital expenditures, albeit slightly, and will continue to do so for the next 3 years, says analyst firm Infonetics Research.

Service provider capex worldwide is expected to increase to over USD 236 billion in 2009, from USD 202 billion in 2005. According to Infonetics’ new Service Provider Capex, Revenue, and Subscribers report, in the 5 year period, service providers will allocate a total of USD 1.1 trillion to capex.

According to the research firm, the spending would have been much higher but for the numbers of mergers taking place.

"Collectively spending over a trillion dollars in 5 years sounds like a lot of money, but it’s actually significantly less than it would be if there weren’t so much consolidation going on," said Stephane Tйral, principal analyst at Infonetics Research.

Teral pointed out that the number of providers is decreasing due to mergers, which is increasing the economies of scale for the combined entities, resulting in considerable capex savings, and hence, the overall capex growth is slow now.

Infonetics expects service provider revenue to grow at a modest rate over the next 5 years to USD 1.4 trillion between 2005 and 2009, which represents a four percent compound annual growth rate from USD 1.2 trillion to USD 1.4 trillion between 2005 and 2009.

"The incumbents’ share of worldwide service provider revenue will increase over the next few years at the expense of the competitives, because mergers among incumbents are lowering price competition and customer churn," continued Teral.

Adding new technologies will be one aspect of driving revenue up. The service providers are constantly adding new technologies like IP-based services like IPTV.

"Offering new media-rich bundled services like IPTV, video on demand, video telephony, and FMC is the only way to thrive in the highly competitive telecom environment. All these new services are software intensive and require only a minimum investment. Since incumbents have a large footprint, even minor revenue increases are driving up their share of the worldwide market."

Infonetics said between 2005 and 2006 CALA providers are expected to increase their Capex by 22 percent, followed by EMEA providers at 15percent, North America at 4 percent and Asia Pacific at 2 percent.


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