December 17, 2014
Revenue growth rates for communications service providers (CSPs) remain modest, but CSPs will continue to invest heavily in their networks, expects Ovum. With global CSP capital expenditures (capex) forecasted to total more than US$2 trillion from 2014–19, the global analyst firm warns CSPs must continue to do less with more, leveraging new technologies, network designs, vendors, and operating models.
In a new report, Ovum reveals 2014 capex will likely be US$34 billion, with fixed CSPs accounting for 41% of the total and mobile the remainder. Ovum expects flat capex in 2015 due to mobile growing roughly the same amount as fixed capex declines. The years 2016 and 2017 are likely to be weak capex-wise, for both the fixed and mobile segments. The research firm said it expect a modest recovery in 2018–19 as a new wave of fixed broadband, fixed cloud/data centre, and mobile broadband upgrades start rolling out in a number of large markets.
Report author and principal network infrastructure analyst Matt Walker said “CSPs have invested fairly heavily in 2013–14 across both fixed and mobile networks to support broadband rollouts. But this capacity will be absorbed, and technology and feature upgrades will drive capex back up to about US$354 billion by 2019. Over the entire 2014–19 forecast period, CSP capex will total over US$2 trillion.”
According to Ovum, as CSPs have navigated the “tight revenue climate, they have been faced with one constant pressure: the need to continue investing in their networks. The CSP business is a capital-intensive one. Technology doesn’t stay stagnant. Users continue to put more pressure on the networks. New players from adjacent markets threaten to steal customers and revenue streams if CSPs can’t keep up. Hence CSPs have continued to spend heavily on networks in the last five years, plowing an average of nearly 18% of revenues per year into capex..
“Going forward, we expect CSPs’ capital intensity (capex/revenue ratio) to fall slightly, to roughly 17.4% on average from 2014–19.”