Global Telecommunications Capital Spending To Decline 4 Percent, Despite Revenue Growth

Yankee Group predicts that telecommunications carriers globally will show measured caution in capital expenditures (capex) in 2009, decreasing from $284B in 2008 to $272B this year. Capex, as a percentage of revenue, will decline from 15.2 percent in 2008 to 14.1 percent in 2009, again reflecting conservative but necessary cuts for carriers, but also signaling tough times ahead for vendors.

"Unlike during the telecom ‘nuclear winter' of 2002, which saw capex spending fall off of the proverbial cliff, the current economic crisis is driving measured capex reductions," said Brian Partridge, Yankee Group Director and co-author of the report "Yankee Group's Global Telecommunications CAPEX Forecast." "Mobile and broadband services have crossed the chasm from luxuries to necessities, in the same vein as electricity and shelter. The centrality of core communications services is the main reason that operators will continue to grow revenue in this period. However, this will be tempered growth, and therefore carriers are rolling back spending to maintain the requisite levels of profitability that the market demands."

The report also predicts:

• Europe, Middle East and Africa will suffer the steepest decline. Capex will drop 10.9 percent, from $121.7B in 2008 to $108.4B in 2009. With declines largely in Western Europe, some emerging markets such as Turkey will experience capex growth.
• Asia-Pacific capex increases will offset overall global declines. Explosive growth in India and China will buoy some planned spending reductions in countries like South Korea and Taiwan, and will yield an overall capex increase of 11.5 percent, from $68.0B in 2008 to $75.8B in 2009.
• North America will experience responsible declines. Capex will drop 7.3 percent, from $71.3B in 2008 to $66.1B in 2009; however, capex as a percentage of revenue will only drop 1.5 percent.
• Latin America will experience only moderate downturns. Continued spending to meet customer demand in several emerging markets will offset some trouble spots, such as Mexico. Capex will decline only 5.1 percent, from $23.3B in 2008 to $22.1B in 2009.

About Yankee Group
The people of Yankee Group are the global connectivity experts—the leading source of insight and counsel for builders, operators and users of connectivity solutions. For nearly 40 years, Yankee Group has conducted primary research that charts the pace of technology change and its effect on networks, consumers and enterprises. Headquartered in Boston, Yankee Group has a global presence including operations in North America, Europe, the Middle East, Africa, Latin America and Asia-Pacific. For more information, visit: www.yankeegroup.com

SOURCE: Yankee Group