Dell’Oro Group and MTN Consulting have released independent research reports on forecast on the Capex of telecom operators and revenue of telecom network makers amid indication of a recession in global markets.
Telecom operator Capex growth will outpace operator revenue growth over the next four years, reflecting operators increased focus on 5G network, according to a research report from Dell’Oro Group.
The report, however, did not reveal the specific growth in both revenue and Capex of telecom operators.
The growth in Capex is a positive development for telecom network makers such as Huawei, Nokia, Ericsson, Cisco, ZTE, ARRIS, NEC, CommScope, Amdocs and Samsung.
Capex of telecom operators in 2015, 2016 and 2017 dropped. Telecom operator Capex was stable in 2018.
“While the relationship between Capex / revenue will likely remain strong over time and constrained operator revenue growth will be one of the primary inhibitors of further telecom Capex acceleration, we remain optimistic that there will be some deviation in the short-term to accommodate the rollout of 5G,” said Stefan Pongratz, senior director at Dell’Oro Group.
Wireless investments are projected to grow at a faster pace than wireline Capex over the forecast period – growing at a low single-digit CAGR.
5G revenue growth is not expected to reverse aggregate smartphone ARPU trends over the forecast period.
Telecom network operators spend over $600 billion per year on capital expenditures and network operating expenses.
Top telecom network vendors in 2018 are: Huawei Technologies (22.4 percent), followed by Nokia (11.9 percent), Ericsson (9.5 percent), Cisco Systems (6.7 percent), ZTE (4.3 percent), ARRIS, NEC, CommScope, Amdocs and Samsung.
Research firm MTN Consulting said Samsung’s share grew 0.5 percent to 1.9 percent on the back of early 5G spending. China-based fiber optic cable supplier Hengtong’s share rose 0.3 percent to 1.5 percent due to overseas sales.
Huawei and Ericsson both saw market share unchanged in 2018. Nokia’s share grew by 0.1 percent.
Network infrastructure vendor revenues to the telecom vertical amounted to $198.3 billion in 2018 — up 1.2 percent from 2017. That growth is an improvement after a 1.4 percent decline in sales in 2017.
MTN Consulting said the outlook on telecom network spending sector for 2019 is mixed.
Concerns are growing in many countries, related to Huawei’s intellectual property practices (and alleged violations), and the Chinese vendor’s dependence on its home government, says Matt Walker, chief analyst at MTN Consulting.
Huawei’s legal troubles provide uncertainty for telecom network operators, as the Chinese company dominates with 22.4 percent of the market’s revenue. This exceeds the combined share of the second and third ranked vendors, Nokia and Ericsson.
Telecoms revenues rose 1.4 percent in 2017. Telecom operators achieved modest growth in the first half of 2018, while dropping 2 percent in the second half. On the other hand, Capex of telecoms reached $301 billion, registering 1.3 percent growth in 2018.
The ratio of Capex to revenues averaged to 16.4 percent in 2018, a relatively low level which has been sustained for several quarters.
Mobile operators in advanced stages of 4G will leverage 5G to scale new IoT services. They will adopt new business models, invest in content, and collaborate with OTT players to roll out differentiated services.
The past has suggested that telecoms will not enhance their Capex if they do not foresee growth in revenue. Anticipated recession will hit both revenue of mobile operators and network suppliers despite the 5G investment push.