Yankee Group foresees new vendor opportunities as carrier capex accelerates

OCTOBER 30, 2006 -- The telecommunications industry is experiencing a rebound in carrier capital expenditures, which will continue to grow faster than carrier revenues for the next three years, contends a new report from Yankee Group (search for Yankee Group). While this intensity in carrier capex does not match what was seen before the 2001 telecom bubble, this significant rebound signals that there is a large opportunity with carriers that have capital expenditures outpacing their revenue growth, say analysts.

Growth in capital expenditures will continue to rise across all regions, including North America, Latin America, EMEA, and Asia-Pacific (APAC), reveals the report. Growth is particularly strong in North America and EMEA, outpacing revenue gains over the last two years. APAC's spending on the other hand, while increasing in absolute terms, has not kept pace with global revenue growth as it trends towards an average of approximately 15% of revenue. APAC construction spending has not been able to keep up with revenue growth despite the pace of network build-out in the region.

"This current increase in carrier capex offers a window of opportunity for telco equipment vendors," contends Nick Maynard, Yankee Group senior analyst. "As carriers move quickly to upgrade their networks, they will choose technology standards that will decide their infrastructure deployment options for the next several years. Vendors that are able to capitalize on this opportunity today will reap the benefits for their next-generation platform market share for the near future," he says.

Yankee Group defines three major industry trends driving this capex rebound in the carrier market: new service deployments, a renewed focus on operational efficiencies, and carrier consolidation. New service deployments are influenced by carriers' triple-play service offerings, the explosion of high-speed enterprise networks, and the integration of wireless and fixed services. Carriers' drive for reduced operational expenditure has translated into a new focus for equipment vendors. In terms of carrier consolidation, merger and acquisition activity is driving telcos to spend money in the short term on integrating their networks, filling in service and geographic gaps, and lowering their operational expenditures.

For more information about the report, "New opportunities for vendors emerge as global capex rebounds," visit Yankee Group.