Report: North American telecom carrier capex hit $63B in 2005

April 13, 2006 Campbell, CA -- According to a report from Infonetics Research, publicly owned service providers in North America spent just under $63 billion on capital expenditures (capex) in 2005, an increase of 8% from 2004, with capex projected to increase 4% to over $65 billion in 2006.

The report says that the increase in capex was driven primarily by significant investments made by Cingular, whose capex jumped 117% from 2004 to 2005, and by Sprint, Verizon, and AT&T. More investments were made in wireless equipment than wireline, but spending on both is up, according to Infonetics..

The firm says that of the capex going to telecom and datacom equipment, the top three investment areas are "voice, mobile RAN, and optical equipment." According to the firm, voice network spending is "generally trending up in dollars" and as a percentage of capex due to increased spending on such areas as broadband, next-gen voice applications, wireless networks, and the shift to IP/MPLS/Ethernet networks.

"As we expected, 2005 ended on a healthy note with a capex-to-revenue ratio of 17% in North America," remarks Stéphane Téral, directing analyst at Infonetics Research. "Although we expect this trend to continue into 2006, the recent wave of consolidation among ILECs will result in 56% of total capex owned by just AT&T and Verizon."

Other North American capex highlights, according to the report, include:

* The combined revenue of all public North American carriers inched up 2% in 2005 to $398 billion, and is expected to top $408 billion in 2006.

* Mobile subscribers increased 12% between 4Q04 and 4Q05 to 184 million; DSL subscribers increased 36% to 22 million; and cable Internet subscribers increased 21% to 26 million.

* RBOCs, IXCs, MSOs, Canadian ILECs, IOCs and wireless carriers all increased their capex in 2005, while CLECs and ISPs decreased their capex fairly significantly.

* RBOCs will increase their capex in 2006 by about 18%, mostly on IP/MPLS routers, optical equipment, voice equipment, broadband aggregation equipment, and mobile RAN.

Infonetics' annual "Service Provider Capex Analysis, North America" report tracks the revenue, capex, and capex-to-revenue ratios of publicly owned North American wireline and mobile carriers, individually and by service provider type. Capex is presented in eight categories: broadband aggregation equipment, mobile RAN, multiservice switches, IP/MPLS routers, optical equipment, voice equipment, other telecom and datacom network equipment, and non-telecom and data network equipment. The number of access lines and DSL, cable broadband, and mobile subscribers per service provider is also included, along with service provider contact information.

The firm notes that its projection for 2005 from one year ago was only 2% lower than actual results for capex, and 0.03% lower for actual revenue.