Telecom disinvestment cycle to last three years

New investment cycle to begin in 2011 driven by 3G roll outs and ramp-up in LTE deployments, according to report from Infonetics Research

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Telecom disinvestment cycle to last three years Capex from telecom operators is expected to decline by 6% globally in 2009. (Shutterstock)
By  Roger Field Published  November 24, 2009

Capital expenditure from global telecom service providers hit a plateau in 2008, marking the end of a five-year investment cycle and the start of a three-year disinvestment cycle, according to a new report from US-based Infonetics Research.

Global telecom capex is expected to decline by 6% in 2009 compared with the previous year, mainly due to a shakeout in the Middle East and Africa, a weakening US dollar, expected declines in the Brazilian and Mexican currencies, and delays in US broadband stimulus funding.

The declines marked the end of an investment cycle that culminated with a combined global service provider capex of $305 billion in 2008 on projects such as network infrastructure upgrades.

Despite the grim data, Stéphane Téral, principal analyst for mobile and FMC infrastructure at Infonetics Research, said that the start of the disinvestment cycle was "less dramatic" than the downturn that followed the telecom crash of 2000.

"Capex will bottom down in 2010 and a new investment cycle will start in 2011, driven by 3G rollouts in India and Central and Latin America, the start of 3G rollouts in Africa, and a ramp-up in LTE deployments in Australia, Brazil, Western Europe, Japan, and North America," he said.

Optical network hardware bucked the trend in the tightened capex environment, with decent single-digit percent spending growth expected in 2009, despite currency devaluations. However, mobile infrastructure will continue to dominate total global telecom and datacom spending, followed by voice equipment.

The report added that worldwide service provider revenue is also forecast to decline slightly in 2009, to $1.67 trillion, driven by mobile communication services, as consumers continue to hold on to their mobile services during tough economic times.

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