Wednesday, October 1, 2014

Global Telecom Capex Will Slow in 2015

Globally, mobile and fixed network service providers will have increased their capital investment by about three percent in 2014, according to Dell’Oro Group.

As you might guess, capex in the mobile segment significantly outpaced investment in fixed networks. Mobile network infrastructure investment was in double digits, while investment in fixed networks was in the low single digits, Dell’Oro Group says.

But Dell’Oro Group also predicts that capex spending will decline in 2015, for reasons that are entirely logical. Capital investment in either mobile or fixed segments tends to occur in stair step fashion.

Investments are made to enable new services or alleviate congestion, create brand new networks or significantly upgrade existing networks. But those construction jobs, once finished, also mean investment will slow until the next required round of infrastructure investment.

Hence the stair step pattern. Also, service providers tend to invest in direct proportion to revenue generation. When they are generating more revenue, they tend to invest more. Conversely, when revenues are declining or flat, they invest less.

“Higher device penetration, decelerating mobile data growth rates, lack of new revenue streams, and increased competition in both the developing and developed markets have caused worldwide revenue growth to decelerate in the last couple of years,” says Stefan Pongratz, Dell’Oro Group analyst.

In particular, “slower growth in service revenues coupled with the rapid network progress during 2014 in China, North America, Japan and Europe will also put some pressure on worldwide capex upside in 2015,” Pongratz said.

One example is investment to support 3G networks. The amount of mobile capex required to support incremental mobile data usage has declined more than 50 percent per year since the smartphone boom started.

On the other hand, with new demands for faster fixed networks, fiber to customer investment and building of new Long Term Evolution 4G networks will drive service provider telecom capital investment in 2014 and 2015.  

No comments:

Ultra-Low Latency Use Cases is Where Most New 5G Apps Will Develop

Though capacity matters, the big use case upside for 5G is expected to come in the area of ultra-low latency applications or perhaps ultra-r...