Global telecom carrier capex growing, slowdown in China expected in 2006, reports Infonetics

November 3, 2005 Boston, MA -- Public carriers in North America, Europe, and Asia Pacific have increased their capital expenditures two years in a row, and are expected to increase them again for a third consecutive year in 2005, according to a report from Infonetics Research.

Nov 3rd, 2005

November 3, 2005 Boston, MA -- Public carriers in North America, Europe, and Asia Pacific have increased their capital expenditures two years in a row, and are expected to increase them again for a third consecutive year in 2005, according to a report from Infonetics Research.

The firm says that carriers in the three regions are expected to increase their capital spending 6% to just under $190 billion in 2005, after 9% annual growth in 2004. According to the report, many of the increases reflect investments in next-generation technologies such as packet voice, broadband, metro Ethernet, and IP/MPLS routers.

Capital expenditures are fairly balanced across the three regions, says the firm, with North America, Europe, and Asia Pacific each representing approximately one-third of the total.

"We expect similar trends to continue in 2006, as incumbent carriers keep their capex-to-revenue ratio around 15%, and carriers in emerging markets maintain higher capital intensities," explains Kevin Mitchell, principal analyst at Infonetics.

"Chinese and Korean carriers are expected to decrease capex in 2005," continues Mitchell. "The anticipated 3% drop in capex in China is due mainly to the slowing down of massive build-outs. The capital intensity for Chinese carriers was over 30% in the last few years, which is an unsustainable ratio. Overall capex in the Asia Pacific region is the slowest growing."

The firm also reports that although carriers in Western Europe far outspend their counterparts in the Eastern, Southern, and Northern regions of Europe, carriers in Eastern and Central Europe are increasing capex at a much faster pace than anywhere else in Europe.

The report, "Service Provider Capex Analysis" says that North American incumbent carriers (US RBOCs, Canadian ILECs) will increase their capex 9% in 2005; the firm says that MSOs are continuing to reduce capex, but are finding a leveling point. In Europe and Asia, the firm says that competitive carriers are increasing capex at a faster pace than incumbents, although incumbents far outspend competitive carriers.

More in Home