North American wireline operator capex up nearly 11 percent in 4Q05

Ovum-RHK: Full-year wireline capex ends 8.4 percent higher than 2004. Analysis of fourth quarter 2005 revenue and capital spending by North American network operators. While overall wireline revenues remained basically flat, capital spending was 10.9 percent higher versus the third quarter. Mobile operators saw revenues rise almost 3 percent sequentially and 18 percent versus 4Q04. Mobile operators spent 22 percent more than in 4Q04, driven by a large increase in capital spending by Cingular.

4Q05 highlights for North American network operators:

• Wireline revenues = $45.6 billion, down 3% versus 4Q04

• Wireline capex = $7.5 billion, down 1.6% versus 4Q04

• Mobile revenues = $31.2 billion, up 18% versus 4Q04

• Mobile capex = $6.7 billion, up 22% versus 4Q04

• Total operator revenues = $76.7 billion, up 4.7% versus 4Q04

• Total operator capex = $14.1 billion, up 8.4% versus 4Q04

Full-year 2005 highlights:

• Wireline revenues = $119.4 billion, down 1.3% versus 2004

• Wireline capex = $26.3 billion, up 8.4% versus 2004

• Mobile revenues = $118.4 billion, up 15.2% versus 2004

• Mobile capex = $22.1 billion, up 17.3% versus 2004

• Total operator revenues = $237.8 billion, up 6.3% versus 2004

• Total operator capex = $48.3 billion, up 12.3% versus 2004

Wireline spending was solid in the fourth quarter, despite being lower than fourth quarter 2004. Full-year wireline capital spending was up by 8 percent over 2004, and full-year wireline capital intensity was above 20 percent for the first time since 2002. North America was a good market for wireline equipment vendors in 2005, by any measure.

Ovum-RHK's analysis also revealed that top-tier wireline carriers in North America lost 9.98 million access lines in 2005, while adding 5.3 million DSL customers, and reducing total UNE-P lines by 27 percent. Investment for broadband service delivery clearly drove telco spending in 2005,stated Lively, and with the same drivers in place, we expect equipment sales in 2006 to be as good as or better than last year. North American network operators

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