North American telecom capex to turn up in 2004, says RHK

April 17, 2002--Wireline service provider capital expenditure (capex) in North America will decline from $77 billion in 2001 to $46-51 billion in 2002, according to a new report from market researcher RHK Inc. (San Francisco).

Apr 17th, 2002

Wireline service provider capital expenditure (capex) in North America will decline from $77 billion in 2001 to $46-51 billion in 2002, according to a new report from market researcher RHK Inc. (San Francisco). Capex will be flat through 2003 as service providers continue to trim capex in an attempt to return to positive cash flow. Service provider capex is expected to experience its first pulse of growth in 2004.

"Despite indications that the general economy is recovering, we don't anticipate an increase in telecom capex next year," contends Melanie Swan, director of RHK's Telecom Economics Program. "All indicators point towards service providers returning to health in late 2003, but still no noticeable increase in overall capex until 2004. While traffic growth remains strong, average long-haul trunk capacity utilization is just 35% and service providers have found numerous means to extract additional capacity from existing networks," she explains. "IP traffic is forecasted to grow 100% in 2002. This tells us service providers have little immediate need to spend much on new network infrastructure."

RHK expects the combination of increasing traffic growth and network capacity utilization to spark equipment orders on high-traffic routes in early 2003.

A global capex forecast for wireline and wireless equipment spending is also available from RHK, featuring a detailed breakdown of capex by technology area and geographic region. RHK's research shows total global capex will decline this year, with the European market experiencing a less dramatic downturn than North America.

"While Europe did not experience the same capex bubble in 1999-2000 as North America, we expect European capex to decrease slightly in 2002 as a result of decreased optical networking spending in the core and metro," adds Swan.

The report, "North American Telecom Is In For a Slow Recovery," is part of RHK's Telecom Economic Program, which explores the financial and economic conditions of the telecom industry and examines service provider financial health and spending patterns. For more information about this program and other RHK services, visit the company's Web site at www.rhk.com.

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