Growth in worldwide telecom capex through 2016 will be “flat to very moderate” through 2016, according to a new forecast from IHS, but the market is “slowly crawling back to 2014 levels.”
“The telecom industry has been cyclical since the great telecom crash of March 2000, which is typical of deregulated industries,” the market research firm wrote in a research note published Monday morning. “Investment goes through cycles of ups and downs that are more or less pronounced depending on how the major players react.”
This year, capex spending has varied due “to regional and national cycle de-synchronization.” Some markets have been flat, while others have seen “very moderate growth.” North America, Europe, the Middle East, Africa, the Caribbean and Latin America have largely seen low-digit growth, for instance, while China has driven an overall decline in Asia Pacific.
Worldwide service provider capex will rise just 0.7 percent by the end of this year to $341 billion due largely to “a much-needed wave of investment in wireline broadband” in Europe, IHS predicted. Spending will rise on every kind of hardware other than wireless and time-division multiplexing (TDM) this year, while capitalized software from outside the telecom/datacom category will grow by double-digit percentages.
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IHS expects steady—if not dramatic—increases in capex worldwide through at least 2020 as operators begin to deploy five technologies and services. Telcos account for more than 88 percent of worldwide capex, the firm estimated, and Asia Pacific remains the world’s largest spender with a 42 percent share.
Indeed, U.S. operators have cut back capex due to several factors: All four major operators have moved to cut spending across business units as competition has increased in recent years and margins have begun to peak. Carriers are looking to small cells—which are already cheaper to deploy than towers—to densify their networks, but that market has been slowed significantly by administrative challenges and a lack of established processes at the local level. Finally, operators are hoping to compile cash in advance of expensive 5G deployments, and Verizon, AT&T and T-Mobile are all still expected to spend billions during the FCC’s ongoing incentive auction of 600 MHz spectrum.
A top AT&T executive said in August the the operator’s capital spending will “definitely” decline over the coming years, due in part to its work to make its network more efficient. And Sprint last month once again lowered its capex guidance for 2016, although it insisted increased momentum in small cell deployments would offset that trend next year.