3G, LTE to up telco carrier spending in 2011

CALIFORNIA, USA: Infonetics Research forecasts a 1.6 percent pick-up in telecom carrier capex in 2011, marking the start of a new investment cycle.

Stéphane Téral, principal analyst for mobile and FMC infrastructure, Infonetics Research, said: “Telecom capital expenditures are bottoming out at $289 billion this year, and our cycle-based forecast model and conversations with service providers indicate that a new investment cycle will start in 2011 and last several years, with capex growing to $321 billion in 2014 before growth slows again."

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From its peak in 2008, worldwide service provider capex declined 5.3 percent in 2009, and is on track to decline another three percent in 2010. This dip is due mainly to the fact that carriers in China, which invested heavily in network upgrades in 2009, have completed their 3G rollouts.

However, despite the overall decline in service provider capex in 2010, some telecom equipment segments are faring well, including video infrastructure and IP routers/carrier Ethernet switches, which saw double-digit worldwide revenue increases in the first half of 2010.

"Overall, capital intensities will continue to slowly decline through at least 2014 because the world’s telecom infrastructure is essentially built out, and unless a nuclear bomb wipes out some of it, there is no need to increase capital intensities,” expects Téral.

Infonetics expects the major areas of investment from 2011 to 2014 to be fiber-based wireline broadband (FTTx), 2G mobile network capacity expansion, network migration from 2G to 3G, and migration to LTE (mobile broadband will follow).

Low equipment pricing resulting from fierce competition between western and Chinese vendors is giving service providers incentive to cap their capex budget and buy more equipment with lower budgets.