Infonetics Research reports that worldwide service provider capex (capital expenditures) totaled $248.8 billion in 2007, a 7% increase from 2006. Infonetics' report projects a spike in worldwide carrier capex in 2008, followed by a plateau in 2010 and a decline in 2011, and emphasizes that the weak US dollar is inflating current growth rates in Brazil, Canada, China, Europe, India, and Japan.
Their analysis indicates that the mobile industry is in the fourth year of an investment phase, and we may be reaching the plateau this year in both North America and Europe, where large service providers' capital intensity (the ratio of capex to revenue) will likely be as low as 12%.
But the hyper growth economies of China and India will drive a significant jump in carrier capex in 2008 as a result of network construction projects combined with currency appreciation against the US dollar, meaning the Chinese RMB and Indian Rupee are buying much more these days. "Both countries are still posting double-digit revenue growth in their native currencies, which, converted in US dollars creates a big spike in worldwide carrier revenue as well," said Stéphane Téral, principal analyst at Infonetics Research.
Interesting Aspects of the report include:
Telecom service providers earned a combined $1.5 trillion in annual worldwide revenue in 2007, up 10% from 2006, with currency appreciation making up the bulk of the growth, while the rest came from wireless services.
Carriers are increasingly investing in application software (vs. hardware) for media rich applications such as content, storage, and security for broadband based wireline and wireless services
Current investment drivers for carrier spending: convergence between IT, media, Internet, and telecom, which is adding new competitive pressures to carriers, and the shift from legacy TDM to next generation IP networks
The world's 10 largest service providers (ranked by 2007 revenue) are AT&T, Verizon, NTT, Deutsche Telekom, France Télécom, Vodafone, Telefónica, China Mobile, BT, and Sprint.
The next largest service providers include Telecom Italia, Comcast, and KDDI, which, according to their most recent growth rates, are poised to join the top 10.
The Asia Pacific telecom industry is squeezed between 2 opposite market forces: a saturated market made of Australia, Hong Kong, Japan, South Korea, Singapore, and Taiwan characterized by flat to decreasing capex, and a fast growing market driven by China and India, characterized by double digit growth for both capex and revenue
Caribbean and Latin America (CALA) service provider revenue jumped 29% between 2006 and 2007
Mobile infrastructure makes up the bulk of total equipment capex in 2007, accounting for about 20%, followed by voice infrastructure, optical equipment, and broadband aggregation equipment
WiMAX equipment spending by service providers as a portion of total carrier capex has roughly doubled each year since 2004, and will continue to increase its share in the near term, driven by major WiMAX projects in the US, India, and Latin America.
Notwithstanding the constant barrage of negative coverage of the price of oil, rising inflation, and the bursting of the housing bubble in the US, UK, Spain and elsewhere, the mobile industry still reflects people's needs to communicate.
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