Telecom service provider capex tops $200 billion, reveals report
July 31, 2006 Campbell, CA -- 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 three years, reveals new research from analyst firm Infonetics Research.
Worldwide, service provider capex topped $202 billion in 2005 and is expected to increase to over $236 billion in 2009. In that five-year period, service providers will allocate a total of $1.1 trillion to capex.
"Collectively spending over a trillion dollars in five 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," notes Stéphane Téral, principal analyst at Infonetics Research. "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. This is why overall capex growth is slow now."
Service provider revenue also is expected to grow at a modest rate over the next five years, from $1.2 trillion to $1.4 trillion between 2005 and 2009, representing a 4% compound annual growth rate. Measured revenue growth like this is typical for a commoditized market.
"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," continues Téral. "At the same time, they're adding new IP-based services like IPTV, driving revenue up. 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," he adds. "Since incumbents have a large footprint, even minor revenue increases are driving up their share of the worldwide market."
The report also notes that:
• North American service providers are expected to increase their capex by 4% between 2005 and 2006, EMEA providers 15%, Asia Pacific providers 2%, and CALA providers 22%.
• Worldwide broadband subscribers (DSL, cable modem, PON, and Ethernet FTTH subscribers combined) hit 176 million in 2005 and will grow to 350 million by 2009.
• DSL subscribers account for 71% of all broadband subscribers, cable for 26%, PON for 2%, and Ethernet FTTH for 1% in 2005.
• Asia Pacific accounts for 37% of worldwide broadband subscribers, EMEA for 30%, North America for 27%, and CALA for 5% in 2005.
Infonetics' new report, "Service Provider Capex, Revenue, and Subscribers," provides worldwide and regional market size and forecasts for service provider capex, revenue, subscribers, and access lines. For more information, visit www.infonetics.com.