After a couple of years of favorable developments, global telecom capex, the sum of wireless and wireline telecom carrier investments, experienced a slowdown in growth during the first half of 2023.
Dell’Oro said that this moderation was not a surprise and reflects the anticipated pullback in especially wireless-related investments, consistent with the findings in the total telecom equipment reports.
The research firm intimated those conditions will remain challenging in 2024 before stabilizing in 2025. Worldwide telecom capex is projected to drop 7 percent by 2025, relative to 2022.
Dell’Oro revealed that its broader telecom outlook is mostly unchanged. Global telecom capex is projected to decline at a 2 percent CAGR over the next three years, as growth in India and stable trends in Europe will not be enough to offset steeper capex deceleration in North America.
The transition towards steady-state conditions in the US will primarily affect wireless activity, leading to a 25 to 30 percent reduction over the next three years. Further, given the doubtful prospect of a change in the current revenue trajectory and the expectation of flat operator top-line growth, capital intensity ratios are approaching 16 percent by 2025, slightly below the current trendline.
“The forces that shape the capex cycle have not changed,” said Stefan Pongratz, VP of Dell’Oro Group. “Operators can raise capital intensities over the short-term, but there is a reason the trend line has stayed flat over the past 10+ years.”
He added, “Since we are now operating at elevated ratios, capex acceleration remains a transitory phenomenon in a world where neither 4G nor 5G has been able to change the revenue trajectory.”
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