Chindia Carrier Capex On The Rise

The following article, condenses the main points of a report put together by the Communications market research firm “Infonetics Research” (the excellent research firm I might add). The firm tracks revenue, capex, capex-to-revenue ratios, opex (operational expenditure), ARPU (average revenue per unit), subscribers, and access lines of public and semi-private/government-owned service providers.

The report, among other points also addresses the ‘Carrrier Capex aspect’ of Chindia , and includes actuals and forecasts from current fiscal ’08 to 2011.

Infonetics Research reports that worldwide service provider capex totaled $248.8 billion in 2007, a 7% increase from 2006….As a separate note here: last year Infonetics also issued a report where it indicated that the Public service providers worldwide, spent a combined $216.2 billion on capex during ’06, up 13% from 2005. The firm than, suggested: that “worldwide capex is expected to grow 4% in 2007 to $224.6 billion”. Obviously their observation was proven right and in-line with expectations since capex, as mentioned at the beginning of this paragraph, totaled $248+ billions proving the accuracy of the firm’s report.

Here are several main points from the report as highlighted in a Lightwave article:

– 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 U.S. dollar is inflating current growth rates in Brazil, Canada, China, Europe, India, and Japan.

“Our capex analysis indicates we are 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%.

Meanwhile, 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 U.S. dollar. Both countries are still posting double-digit revenue growth in their native currencies, which, converted in U.S. dollars creates a big spike in worldwide carrier revenue as well,” says Stéphane Téral, principal analyst at Infonetics Research.

Other Highlights from the report:

– “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 (versus 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 incumbent share of North American carrier capex jumped from 56% to 63% in 2007; MSOs are expected to increase their share of North American carrier capex by 2011.

– The Asia Pacific telecom industry is squeezed between two 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.

– 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”.

Disclaimer: This page contains affiliate links. If you choose to make a purchase after clicking a link, we may receive a commission at no additional cost to you. Thank you for your support!

About Ron Haruni 1068 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.