Communications service providers will face heavy capex in coming years: Ovum

Communications service providers will face heavy capex in coming years: Ovum

Investment in the next five years to reach US$2 trillion

Communications service providers will continue to invest heavily in infrastructure in the next five years, according to a recent report released by Ovum.

The technology research and advisory firm released its Communications Service Provider Revenue and Capex Forecast: 2014-19 that predicts comms providers will experience modest revenue growth in the period.

Despite this the report says these providers will continue to invest heavily in networks. Global capex is said to total more than US$2 trillion by 2019.

Report author and Ovum principal network infrastructure analyst, Matt Walker, said providers have invested fairly heavily in 2013–14 across both fixed and mobile networks to support broadband rollouts.

“But this capacity will be absorbed, and technology and feature upgrades will drive capex back up to about $354bn by 2019. Over the entire 2014–19 forecast period, CSP capex will total over $2tn."

Walker said comms providers faced a tough revenue climate for several years and learned to keep a lid on capex through a number of tactics.

He highlighted network sharing as one of these. "We've seen rapid growth in network-sharing agreements over the last year or two.

“Network and tower sharing projects reach 100 by end 3Q14, up 32% from last year.”

“Even China has joined the party; mobile revenue growth has slowed rapidly there over the last few quarters, and the new tower-sharing venture is meant to help operators lower their cost base and increase efficiency."

The report states providers are also adding software intelligence into their networks. Ovum says the investment such market players made over previous years may soften initial capex costs in the period.

According to the report vendors typically spend 50 to 70 per cent or more of product R&D on software, in fact, revealing its importance to future network operations.

Software-defined networks (SDN) and network functions virtualization (NFV) are another sticking point. While not necessarily offering immediate capex savings, one clear aim of comms provider proponents of SDN/NFV is to lower both operations and capital costs, along with new service/feature deployment.

Walker said that while capex is tightly constrained in the sector, adjacent markets are starting to invest heavily in networks.

Read more: Telco IT budgets on the rise in 2015

“Internet content provider (ICP) capex will reach nearly $57bn in 2014, up from $18.3bn five years ago. We expect network capex from the ICPs – which include Google, Apple, Facebook and many others – to continue growing over the next few years. These providers represent an attractive growth market opportunity for vendors selling technology."

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Tags researchtelecommunicationCAPEXovumcommunications service provider

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