According to a recently published report from Dell’Oro Group, worldwide newtork operator capex is forecast to rise from 2017 through 2020 despite flat carrier revenues. The most notable increases come from AT&T, Sprint, Megafon, Orange, Etisalat, and Deutsche Telekom.
“We have adjusted our overall three-year CapEx expectations upward to reflect a more optimistic investment view than we had originally envisioned in both the US and Chinese markets,” Stefan Pongratz, a senior analyst at Delloro, said in a blog post online. The increase in global CapEx is being driven by increased spending in the US, as the country tries to position itself at the front of the queue for 5G deployment.
“After three consecutive years of declining capex, short-term and near-term market expectations have shifted up,” Pongratz said.
“Here in the US, we maintain the view that conditions are stabilizing and both capex and capital intensity will continue to trend upward. There are multiple factors that support our renewed optimism for capex in the US:
- We are seeing our first signs of US Federal tax reductions translating into increases in capex with a clear boost in AT&T’s 2018 capex projections.
- We see Sprint investing again
- FirstNet investments are set to commence in 2018
- Larger data plans are propelling capacity investments
And lastly, overall carrier revenue trends are stabilizing,” continued Pongratz.
However, total capex spending in China [Figure 1. below] is still expected to decline year-on-year in 2018 and stay flat in 2019 before returning to growth in 2020.
Currency adjusted operator revenues are projected to remain flat between 2017 and 2020, with operators expected to struggle to find new revenue streams to offset slower smartphone revenue growth.
While the IoT has long-term revenue generation possibilities, there is expected to be limited benefit over the next few years. Dell’Oro estimates that carrier IoT revenues will account for just 2% of total mobile revenues by 2020. Preliminary IoT connection pricing trends for 2017 are cause for concern, with downside risks to the IoT carrier revenue forecast, should price trends prevail. Please see Figure 2. below for Dell ‘Oro forecast of IoT Carrier revenue growth through 2020.
About the Report
The Dell’Oro Group Carrier Economics Report provides in-depth coverage of more than 50 carriers’ revenue, capital expenditure, and capital intensity trends. The report provides actual and forecast details by carrier, by region, by country (United States, Canada, China, India, Japan, and South Korea), and by technology (wireless/wireline). The report also discusses further capex accelerating factors such as preparation for 5G and inhibiting factors such as the flat revenue trend. The report assumes operators will struggle to identify new revenue streams.
To purchase this report, please contact Matt Dear at +1.650.622.9400 x223 or email [email protected].
About Dell’Oro Group
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, networks, and data center IT markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit www.delloro.com.