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Service provider CapEx to rise in ’04: In-Stat

Worldwide service provider Capital Expenditure (CapEx) budgets totaled US$196 billion in 2003, which was a drop of...


July 27, 2004  


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Worldwide service provider Capital Expenditure (CapEx) budgets totaled US$196 billion in 2003, which was a drop of about 4% from 2002, reports In-Stat/MDR.

However, the high-tech market research firm expects that spending will begin to turn around in 2004 with about a 2% growth in spending as service provider financial situations improve and the economy grows.

“Service provider CapEx budgets have been shrinking since they peaked in 2000, when the investment bubble broke,” said Henry Goldberg, a senior analyst with In-Stat/MDR.

Worldwide CapEx budgets were about 31% of services revenues in 2000, and have declined to about 20% of services revenues in 2003.

“Service providers have been reducing CapEx investments to improve their near-term profitability, as their overall revenues have remained relatively flat,” said Goldberg.

In 2003, service providers reduced their spending on such WAN equipment as voice circuit switches, mobile wireless infrastructure, multi-service switches and optical transport equipment.

They also purchased more packet telephony equipment, packet telephony gateways and soft switches, to replace voice circuit switches.

In-Stat/MDR has also found that:

* The single largest component of worldwide WAN equipment sales was mobile wireless infrastructure, which was about 29% of total worldwide Network CapEx budgets;

* Voice circuit switches are still the largest component of CapEx for wireline networking hardware, though their share has been declining over time, and

* Data switches/routers/gateways accounted for about 7% of 2003 WAN equipment sales to service providers, and are becoming a growing percentage of sales as data and packet voice traffic and services grow, relative to circuit-switched voice.