European telecom carrier capex up 10% to €54B, Asia capex hits US$62B in 2005

Infonetics: Incumbent, competitive, and wireless service providers in Europe increased their capital expenditures 10% to €54 billion between 2004 and 2005, while providers in Asia Pacific inched up their capex 2% to US$62 billion,.

In Europe, the 10% boost in overall service provider capex was driven primarily by significant increases at Telefónica, Deutsche Telekom, France Télécom, and some strong investment activity in Central and Eastern Europe.

In the Asia Pacific region, the modest 2% capex increase in 2005 followed a massive 13% jump in 2004. The relative slowdown was caused by significant cuts at PT Telkom, NTT, China Telecom, and China Unicom.

From our conversations with Asia Pacific carriers, we’re seeing several areas of growth where capex investments will be concentrated this year. In Japan and South Korea, the focus is broadband, 3G, and VoIP. In Hong Kong, New Zealand, and Singapore, it’s all about broadband. In Australia and New Zealand, it’s PSTN migration. And in India, Indonesia, and the Philippines, the focus is on wireline infrastructure buildouts to increase teledensity.

In Europe, spending in 2006 will increase primarily on broadband wireless and wireline services,Téral continued. As 3G upgrades are well underway in the region, the share of mobile RAN capex of total capex will decrease while voice equipment capex will be the only one to increase. Major projects such as Deutsche Telekom's nationwide broadband upgrade will drive spending in DSL, fiber, IP/MPLS, and optical.

Europe Highlights

• European carrier capex is expected to increase 13% to €60 billion in 2006

• The combined revenue of all public European carriers rose 5% in 2005 to €361 billion, and is expected to increase another 7% to €385 billion in 2006

• European service providers spent 15% of their revenue on capex in 2005, a healthy, sustainable capex-to-revenue ratio that will continue through 2006

• Competitive and cable service providers upped their capex significantly in 2005 (20%), but will reverse the trend in 2006 (-2%), while incumbent carriers are steadily increasing capex (up 10% in 2005 and 18% in 2006)

• Mobile subscribers increased 19% between 4Q04 and 4Q05, DSL subscribers increased 52%, and cable broadband subscribers increased 50%

Asia Pacific Highlights

• Asia Pacific carrier capex is expected to increase 2% to US$63 billion in 2006

• The combined revenue of all public Asia Pacific carriers rose 4% in 2005 to US$291 billion

• Asia Pacific service providers spent 21% of their revenue on capex in 2005

• Wireless service providers upped their capex 8% in 2005 and will increase it 16% in 2006; competitive and cable service providers will increase capex 8% in 2006; and incumbent carriers decreased capex slightly in 2005 and will make further cuts in 2006

• Mobile subscribers increased 21% between 4Q04 and 4Q05, DSL subscribers increased 47%, and cable broadband subscribers were flat

Service Provider Capex Analysis

Publ 20060515