Tuesday, April 17, 2012

Telecom Service Providers Await Economic Recovery

Due to a partial improvement in both the fixed (wireline) and mobile (wireless) network communication sectors, telecom service provider revenues passed the $1.91 trillion mark in 2011 -- that's compared to $1.79 trillion in 2010, according to the latest global market study by Ovum.

Carrier capital expenditure (capex) investment also rose in 2011, but late-year economic jitters depressed the global growth rates.

In a new Ovum report, Matt Walker, a Principal Analyst in Ovum’s Networks practice, said: "Economic worries caused budget cuts late in the year, hitting Service Provider capex."

Overall for 2011, capex grew 9 percent to $306 billion, due to double-digit percentage growth in the first three quarters; capex declined 1 per cent year-over-year (YoY) in 4Q11.

Among the top 10 capex spenders were two from North America (AT&T, Verizon), China’s three big carriers, NTT, and four European operators with multinational operations (DT, Telefonica, Vodafone, and FT).

That being said, both revenues and capex for 2011 were in line with Ovum’s most recent forecast.

Global Service Provider capital intensity -- or capex divided by revenues -- was 16.0 percent for 2011, also in line with their forecast. Ovum expects the rate to eventually edge towards 15 percent over the next 5 years.

While the forecast was on target globally, some regions did under-perform.

The only sizable 2011 surprise came in the MEA region, where actual revenues and capex were 10 and 7 percent lower than expected, respectively.

This is due partly to political volatility (financial crisis in Greece, etc) at year-end which affected some carrier's network expansion plans.

On the other side, North America’s revenues were 2 percent above forecast, though weak 4Q capex by Verizon and Sprint pushed 2011 capex down 4 percent below forecast.

Going forward, Walker said, "Signs have emerged in 2012 of a slowly improving economy, and further improvement should help reach the revenue goal and capex growth targets of 3 and 6 percent respectively."

Yesterday I shared the findings of another industry analyst, although that market assessment was just for the mobile network operator sector, and I'm now wondering if some European service providers are holding back on new investment. They're apparently waiting for signs that the economic recovery is still on track.

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