India Telecom Operator Capex Drops 39 Percent in 2010

The year 2010 was one of the worst years for the telecom equipment vendors in India.  Capex by service providers has dropped by 39 percent in 2010.



The delay in 3G and broadband wireless spectrum auction, 2G scam, short term negative outlook and import restrictions for telecom equipments were the primary reasons. Many operators put on hold on their expansion plans. Indian telecom market is yet to see 3G roll out across the country. After the spectrum auction, no Indian private telecom service provider launched broadband wireless access (BWA) services.



According to Ovum, worldwide service provider Capex declined by three per cent in 2010. However, this was an improvement from the nine per cent Capex decline in 2009. Significantly, in the fourth quarter of 2010, carrier Capex rose two per cent when compared to the fourth quarter of 2009.



This modest year-on-year service provider Capex increase was the first such growth since the fourth quarter of 2008 and is another sign that recovery in the telecoms sector is on track.



The Asia-Pacific region excluding China and India had the second best regional capex growth in 2010, versus 2009, up 4.4 percent; India’s 39 percent drop was the poorest result. Ovum is optimistic on India’s pick up in 2011-12. China, on the other hand, fell by 19 percent, dropping capital intensity to 26.6 percent, the lowest since 2006.



The late pick-up of global capex in 2010 drove the full-year results. There is usually a fourth quarter budget flush, but 2010 was stronger than 2009, when most carriers remained jittery. Vendors which faced several quarters of lean times are certainly happy to see the Capex tap turned on again”,  said Matt Walker, Ovum principal analyst and author of the report.



Most of the big telecom equipment vendors enjoyed healthy top-line YoY growth for the fourth quarter of 2010. The best performing of the larger vendors included ZTE and Juniper, with 40 per cent and 26 per cent YoY revenue growth respectively. Alcatel-Lucent and Ericsson also did well with YoY growth of 13 per cent and 11 per cent respectively. Meanwhile, Nokia Siemens Networks’ revenues in the fourth quarter of 2010 grew by 0.5 per cent to hit $5.4 billion, NSN’s first positive YoY revenue growth since the third quarter of 2008.




 Global telecom service provider revenue grew 4 percent. Thanks to the recovery in many markets, telecoms service provider revenues grew by four per cent in 2010 to reach $1.85 trillion.



The primary drivers for the marginal increase in revenue are a strong growth in the mobile market in the BRIC (Brazil, Russia, India and China) economies, according to Ovum.



The four per cent growth represents a notable improvement from 2009, when revenues fell by four per cent.



Meanwhile average profitability showed positive signs, as measured by metrics such as operating cash flow and net profit margins, EBITDA (earnings before interest, taxes depreciation and amortisation) and net debt.



It’s too early to break out the champagne just yet, but within the context of a slowly improving global economy, the telecoms sector is returning to sustainable growth”,  Walker added.



By Team


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