Wireless operators are expected to make an investment of nearly $210 billion (+15 billion) towards Capex (capital expenditure) in telecom networks and software in 2016, said Joe Hoffman, managing director and VP Strategic Technology at ABI Research.
The $15 billion anticipated increase in Capex by wireless operators this year is not a good sign for telecom vendors such as Ericsson, Nokia, Huawei, Cisco, HPE, Juniper, IBM, ZTE, Oracle, Brocade, among others.
Wireless telecom vendors are challenged by all this, and are diversifying their portfolios with greater and more varied managed services offerings, converging IT and telecom functions and branching into adjacent business lines.
ABI Research sees wireless operator Capex at $194 billion in 2015, essentially flat from 2014. “We do expect 2016 will show an increase of $15 billion in 2016. 2016 starts the slide in cellular base station revenues coinciding with 4G LTE deployments wrapping up in the major markets,” said Joe Hoffman in a statement to TelecomLead.com.
ABI Research said the leading wave of 4G LTE operators move on to densification with investments in small cell and in-building technologies, but those revenues do not offset the decline in macrocell base stations.
Operators continue to invest in packet core networks with about 10 percent growth in 2015, with just-in-time procurement for data traffic growth. However, future revenues in the packet core will slow down as operators move to virtualized NFV solutions.
Communication Capex in 2015
Ovum in a recent report said total Capex by all communication providers was flat in 2015 at $405 billion, despite CSP (telecoms) cutbacks. ICPs (cloud/OTT providers) share of global Capex at 15 percent (+1 percent) is forecast to grow to 23 percent by 2020.
Capex for both fixed and mobile communications service providers (CSPs) fell 5 percent vs. 2014. Growth in the Internet content provider (ICP) and carrier-neutral provider (CNP) segments slowed but remained strong.
Ovum says annualized CP revenues grew steadily from $2.2 trillion in 2009 to $2.86 trillion in 2014 but fell every quarter in 2015.
LTE networks will generate nearly $800 billion in annual service revenue by 2020, according to SNS Research.
Global CSP Capex share in 2015: China, Japan, and the US, each with its own set of vendors, claimed 48 percent in 2015. Germany, Canada, UK each had 3 percent, followed by eight with 2 percent each (Italy, France, India, Brazil, Australia, Russia, Korea, and Mexico) then Spain with 1 percent. Top 15 are 75 percent of market, according to Ovum.
In 2015, 2G, 3G and 4G wireless infrastructure revenues stood at nearly $65 billion, SNS Research estimates. These revenues will remain flat in 2016, largely due to declining macrocell RAN and mobile core investments. Over the next four years, the market is expected to decline at a CAGR of 1 percent, eventually shrinking to $61 billion by the end of 2020.
Wireless network Capex in coming years
The growth in the global wireless network infrastructure market will remain relatively flat through 2020, with annual investments of over $61 billion.
The wireless network infrastructure includes macrocell RAN (Radio Access Network), mobile core segments of mobile operator networks, Heterogeneous Network or HetNet infrastructure such as small cells, carrier Wi-Fi and DAS (Distributed Antenna Systems).
The flat growth in the wireless network infrastructure market is due to a decline in macrocell RAN infrastructure spending. There will be significant shift in investments towards small cells, C-RAN, DAS and carrier Wi-Fi infrastructure, said SNS Research.
Small cells, C-RAN, DAS and carrier Wi-Fi infrastructure, together with their fronthaul and backhaul segments, will account for over 50 percent of all wireless network infrastructure spending by 2020.
Small cell and C-RAN solutions are beginning to converge as small cell OEMs seek to capitalize on the benefits of centralized coordination for in-building and enterprise coverage.
Telecom investment plans
Telecom market will be seeing both positive and negative investment trends in key markets.
Vodafone Group has said its investment will be less in 2016 as compared with 2015 after completing its Project Spring investment program. 4G and fiber will be its main focus areas.
Capital spending of Verizon will be between $17.2 billion and $17.7 billion in 2016. Verizon will be investing in capacity and optimization of its network. The US telecom company prepares to pilot 5G technology in 2016.
In 2015, Verizon invested approximately $28 billion in spectrum licenses and telecom infrastructure for future network capacity. Verizon’s Capex alone totaled $17.8 billion (+3.4 percent) in 2015 – driven by LTE networks. Wireless Capex of Verizon was $11.7 billion (+11.5 percent).
Bharti Airtel, a leading telecom operator, is planning to make an investment of $2.2 billion in India towards Capex. Bharti Airtel’s total Capex for India, Africa and South Asia will be $3 billion. Airtel is investing Rs 60,000 crore in India alone in the next 3 years.
Vodafone India will be spending cautiously in 4G infrastructure in India in 2016, though financial services firm Morgan Stanley said in a report that rolling out of 4G infrastructure is critical for higher internet speed in India.
“We expect 90 percent of users in India to access Internet through mobile by 2020. Availability of 3G and 4G mobile network becomes critical for Internet speeds,” said Morgan Stanley.
Existing and new telecom operators have already incurred huge Capex to roll out 4G infrastructure. Further, through its Digital India program, the government plans to spend $17 billion to connect 600,000 villages through a fiber optics network.
Internet penetration in India has reached 30 percent, but Internet speeds remain low. Broadband penetration is 16 percent in India. Moreover, wireline broadband penetration is even lower at 8 percent.
Globally, the gap between Internet and broadband penetration is highest for India and Brazil. A report from Akamai Technologies says the average broadband speeds for India and Brazil is among the lowest globally at nearly 3mbps.
This investment trend for 2016 shows that leading telecoms in emerging mobile markets need to invest more in infrastructure to tap the data opportunity.
Baburajan K
editor@telecomlead.com
