Carrier Capex Scene is Ugly, But Expect H2 Growth

Global service provider capex will see a net 2.8 percent downturn in 2009, though the second half will show a hike in growth thanks to service provider revenue showing economic resilience.

Capex hit a plateau at $298 billion in 2008, marking the end of a five-year investment cycle, according to Infonetics Research. Then it began to sharply decline in 2009.

“As we anticipated, the first quarter of 2009 was ugly for equipment vendors because service providers were very cautious, pulling back significantly in some areas, particularly TDM and IP voice infrastructure and SONET/SDH optical equipment spending,” said Stéphane Téral, Infonetics Research’s principal analyst for mobile and FMC infrastructure.

However, the second half of 2009 will be much better, pulled along by resilience in the service provider arena and increased competition. Worldwide service provider revenue is expected to weather the economic storm and grow from $1.7 trillion in 2008 to $2 trillion in 2013. Overall, service providers around the globe are maintaining clean balance sheets, and consumers are increasing mobile Internet usage on their iPhones and other smartphones, Infonetics found.

In fact, mobile infrastructure capex will continue to dominate total global telecom and datacom spending, followed by voice equipment

“China’s massive stimulus plan is kicking in, the U.S. stimulus package is about to kick in, money is flowing in Russia, and Brazil and China are getting back on track and will grow faster than the developed world,” said Téral. “This all adds up to a likely capex hike in the second half of 2009, driven by the learned lesson that if operators don’t invest in their increasingly traffic-burdened networks to maintain high-quality service, they risk losing customers to competitors.”

This year, the firm says, will be followed by a flat 2010 and a slow return to growth in 2011 with the start of a new investment cycle.

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