Telecom service provider capex hits $202 billion,revenue $1.2 trillion in 2005

Infonetics:For the third year in a row, telecom service providers worldwide increased their capital expenditures, albeit slightly, and will continue to do so for the next 3 years.

Worldwide, service provider capex topped $202 billion in 2005, and is expected to increase to over $236 billion in 2009. In that 5 year period, service providers will allocate a total of $1.1 trillion to capex.

Collectively spending over a trillion dollars in 5 years sounds like a lot of money, but it’s actually significantly less than it would be if there weren’t so much consolidation going on. The number of providers is decreasing due to mergers, which is increasing the economies of scale for the combined entities, resulting in considerable capex savings. This is why overall capex growth is slow now.

Service provider revenue is also expected to grow at a modest rate over the next 5 years: from $1.2 trillion to $1.4 trillion between 2005 and 2009, representing a 4% compound annual growth rate. Measured revenue growth like this is typical for a commoditized market.

The incumbents’ share of worldwide service provider revenue will increase over the next few years at the expense of the competitives, because mergers among incumbents are lowering price competition and customer churn, continued Téral. At the same time, they’re adding new IP-based services like IPTV, driving revenue up. Offering new media-rich bundled services like IPTV, video on demand, video telephony, and FMC is the only way to thrive in the highly competitive telecom environment. All these new services are software intensive and require only a minimum investment. Since incumbents have a large footprint, even minor revenue increases are driving up their share of the worldwide market.

• North American service providers are expected to increase their capex by 4% between 2005 and 2006, EMEA providers 15%, Asia Pacific providers 2%, and CALA providers 22%

• Worldwide broadband subscribers (DSL, cable modem, PON, and Ethernet FTTH subscribers combined) hit 176 million in 2005, and will grow to 350 million by 2009

• DSL subscribers account for 71% of all broadband subscribers, cable for 26%, PON for 2%, and Ethernet FTTH for 1% in 2005

• Asia Pacific accounts for 37% of worldwide broadband subscribers, EMEA for 30%, North America for 27%, and CALA for 5% in 2005

• Worldwide mobile subscribers reached 1.7 billion in 2005, and will grow to 2.9 billion in 2009

• Asia Pacific is the leading region for mobile subscribers, accounting for 45% of the worldwide total in 2005, followed by EMEA with 39%, North America with 10%, and CALA with 6%

Service Provider Capex, Revenue, and Subscribers Publ 20060727