YOU ARE AT:Network InfrastructureCarrier capex seen slipping

Carrier capex seen slipping

Carrier service revenue is not keeping pace with customer data usage, and that could mean that operators will not continue current levels of infrastructure spending. In addition, the two biggest spenders in the North American market — Verizon Wireless and AT&T Mobility — are both nearing the end of their LTE buildouts.

“We believe multiple factors will contribute to a decline in capex during 2015,” said Stefan Pongratz, Dell’Oro Group’s carrier economics analyst. “Higher device penetration, decelerating mobile data growth rates, lack of new revenue streams, and increased competition in both the developing and developed markets have caused worldwide revenue growth to decelerate in the last couple of years.”

“If you look at the mobile data traffic growth rate it used to be doubling year over year, and now we’re down to growing about 60% year over year in mobile data traffic,” said Pongratz, citing statistics from the Ericsson Mobility Report. “If you look at the year-over-year growth rate trends, it has been declining for the past seven or eight quarters consecutively,” he said.

Dell’Oro Group projects a 2% decline in North American carrier spending on wireless and wireline equipment and services in 2015. He said the biggest reason for the projected decline will be decreased spending from AT&T Mobility and Verizon Wireless.

Macro economic factors may also play a role in the outlook for carrier capital expenditures. International economists expect global growth of 4% next year but caution that increasing geopolitical risk could dampen demand. This could impact carrier spending.

“The somewhat pessimistic forecast for 2015 demonstrates that even carriers are not immune from aggregate demand issues,” said Rich Carlson, author of Wireless Broadband Infrastructure: A Catalyst for GDP and Job Growth, a 2013 report commissioned by PCIA. But Carlson is hopeful that any slowdown will be temporary. “It would not surprise me to see carriers turn the capex spigot on later in 2015 particularly if China and Europe show signs of coming out of their respective slumps,” he said.

North America could continue to be a global bright spot, with capital from Europe (Deutsche Telekom) and Japan (Softbank) helping to fund the infrastructure needed to support America’s appetite for mobile data. “I think [North America] will continue to grow modestly over the next few years due to the economic strength of the U.S. and the increasing adoption of new mobile applications fueling subscriber gains,” Carlson said.

Follow me on Twitter.

ABOUT AUTHOR

Martha DeGrasse
Martha DeGrassehttp://www.nbreports.com
Martha DeGrasse is the publisher of Network Builder Reports (nbreports.com). At RCR, Martha authored more than 20 in-depth feature reports and more than 2,400 news articles. She also created the Mobile Minute and the 5 Things to Know Today series. Prior to joining RCR Wireless News, Martha produced business and technology news for CNN and Dow Jones in New York and managed the online editorial group at Hoover’s Online before taking a number of years off to be at home when her children were young. Martha is the board president of Austin's Trinity Center and is a member of the Women's Wireless Leadership Forum.