Technology | Media | Telecommunications

Wednesday, November 05, 2008

Global Carriers to Invest $142B in Networks

When service revenues dip due to reduced end-user confidence, a standard tactic is to cut back on capital expenditure, which boosts operating margins and thereby profits. This tactic was used in the dot.com bust and the 3G network anticlimax earlier in this decade.

Adjusting, sometimes even drastically, capital expenditure plans can demonstrate to investors appropriate financial housekeeping practices. Network operators can also resort to a number of alternative strategies to make their capex dollars go further.

"Subscriber growth may be flattening and carriers are facing tougher credit conditions from financial institutions, but the need to upgrade infrastructure and install new equipment will not go away," comments ABI Research vice president Jake Saunders.

Competitive pressures are putting the thumbscrews on carriers to introduce innovative applications and services such as music downloading, mobile TV, and social networking.

Furthermore the amount of traffic generated from voice, messaging, emails, games, content downloads, mobile Internet access, video streaming and other services is growing dramatically.

The introduction of the Apple iPhone 3G and other devices such as Samsung's Omnia and RIM's Bold have transformed the end user's mobile Internet browsing experience -- they have also resulted in a substantial delta to the average amount of data downloaded per user.

In 2007, global capital expenditure by carriers stood at $131 billion. Despite the worsening credit crisis, 2008 will still notch up capital expenditure of $142 billion, or 8.3 percent year-over-year.

ABI Research forecasts that 2009 is likely to show a reduced capex growth rate of 7 percent. Still a good showing, considering the state of the global network economy.

Base stations still account for the lion's share of capex spending (49.5 percent), driven by coverage and infill base-station build-out, followed by backhaul (19.2 percent) and the core network (15.7 percent), including Mobile Switching Centers, Media Gateways, etc.