Equipment spending to grow while telecom capex declines in 2023, says Dell’Oro

April 6, 2023
While capex is expected to decline, as part of a general downward trend of negative 2% to 3% CAGR over the next three years, spending on wireline and wireless telecom equipment will manage a 1% growth rate year-on-year in 2023.

Analysts at Dell’Oro Group expect a decoupling of telecom spending and capex trends worldwide in 2023. While capex is expected to decline, as part of a general downward trend of negative 2% to 3% CAGR over the next three years, spending on wireline and wireless telecom equipment will manage a 1% growth rate year-on-year in 2023, the market research firm states in its latest three-year Telecom Capex Report.

Dell’Oro notes that capex for 2022 didn’t quite meet the 3% growth it had originally forecasted, due in part to the strength of the U.S. dollar. Even with forecasts adjusted for currency fluctuations, however, the analysts believe that weakness in North America (see chart above), will offset growth in areas such as India to bring capex spending into negative territory over the next three years.

That said, such a downward trend doesn’t signal doom for equipment spending – at least this year, according to Dell’Oro analysts. “The relation between service provider capex and telecom equipment is not perfect, partly because the equipment makes up roughly one-third of the capex,” explained Stefan Pongratz, vice president and analyst with Dell’Oro Group. “Even with the inherent wiggle room, aggregate R-squared for capex and equipment is in the 0.8+ range over the past seven years, so it is obviously an important metric to consider for short-term projections. At the same time, it is not the only input, and with the equipment market expected to grow 1% in 2023 and telco capex projected to decline, it can be inferred that the Dell’Oro analyst team is modeling some minor decoupling over the short-term.”

Dell’Oro also believes capital intensity ratios will improve and approach 16% by 2025. However, this forecast rests on an assumption that carrier revenues will remain flat and outperform capex, the analysts note.

Dell’Oro’s Telecom Capex Report covers more than 50 telecom operators, highlighting carrier revenue, capital expenditure, and capital intensity trends. The report provides actual and three-year forecast details by carrier, by region by country (United States, Canada, China, India, Japan, and South Korea), and by technology (wireless/wireline).

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About the Author

Stephen Hardy | Editorial Director and Associate Publisher, Lightwave

Stephen Hardy is editorial director and associate publisher of Lightwave and Broadband Technology Report, part of the Lighting & Technology Group at Endeavor Business Media. Stephen is responsible for establishing and executing editorial strategy across the both brands’ websites, email newsletters, events, and other information products. He has covered the fiber-optics space for more than 20 years, and communications and technology for more than 35 years. During his tenure, Lightwave has received awards from Folio: and the American Society of Business Press Editors (ASBPE) for editorial excellence. Prior to joining Lightwave in 1997, Stephen worked for Telecommunications magazine and the Journal of Electronic Defense.

Stephen has moderated panels at numerous events, including the Optica Executive Forum, ECOC, and SCTE Cable-Tec Expo. He also is program director for the Lightwave Innovation Reviews and the Diamond Technology Reviews.

He has written numerous articles in all aspects of optical communications and fiber-optic networks, including fiber to the home (FTTH), PON, optical components, DWDM, fiber cables, packet optical transport, optical transceivers, lasers, fiber optic testing, and more.

You can connect with Stephen on LinkedIn as well as Twitter.

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