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Financial

Global Capex Set for 2010 Rebound

Carrier purse strings will be tighter in 2009, but the overall global telecom capital expenditure (capex) is set to rebound in 2010 and continue to rise in the following three years, according to a new Light Reading Insider report.

According to analyst Simon Sherrington, global annual capex is set to decline by about 0.7 percent in 2009 to around $297 billion, with steeper declines in mature markets such as the U.S. and Western Europe offset by investments in growth markets such as China and India, and regions such as Africa and the Middle East. (See Telefónica Slashes Capex by 10%, AT&T Cuts Capex by up to $3B, LR Poll: Capex to Crash in '09, China Mobile Preps 3G Surge, India Adds 15M Mobile Subs in January, Top 10 Telecom Markets: Asia, and China Awards 3G Licenses. )

But the contraction should be short-lived. In his report, "After the Freeze: A Five-Year Telecom Capex Forecast," Sherrington forecasts an increase in global spending in 2010 and in the following three years, with the global capex total hitting $350 billion in 2012.

So is this good news for the vendor community? Not necessarily, notes the analyst, who sees good times ahead for the likes of Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). (See Huawei, ZTE Predict 2009 Growth.)

"The fact that much of the growth is coming from China is not great news for Western vendors – local vendors can be expected to win the lion's share of the spending. They may also do well in India, where the operators are likely to be very cost-conscious... The Chinese vendors' aggressive pricing strategies will stand them in good stead," notes the analyst.

The investment trends also favor those companies focused on hardware and software for mobile networks. Sherrington expects the share of global capex invested by mobile operators to rise from about 55 percent of the global total to more than 59 percent by 2013. (See Ericsson: Mobile Sector Is Resilient.)

That still leaves good opportunities for fixed network specialists, though, he adds. "Strong revenue streams will be available in the coming years as a result of increasing fiber deployment," though a growing portion of carrier spending will be heading the way of civil and engineering companies as operators invest in digging trenches and laying cables. (See Asia's High Fiber Diet, FTTH Europe: Greece Plans €2B Rollout, and FTTH Europe: Slow Growth Forecast.)

— Ray Le Maistre, International News Editor, Light Reading


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Stevery 12/5/2012 | 4:10:07 PM
re: Global Capex Set for 2010 Rebound But the contraction should be short-lived.

Wow. I must live on a different world. I thought the sky was blue, but maybe I'm mistaken.

Here's my prediction: This is going to be the biggest meltdown of your analyst lives.
waverunner 12/5/2012 | 4:10:06 PM
re: Global Capex Set for 2010 Rebound I love these reports, filled with company cameos hoping they'll cough up 2G's just to see their name in writing. Let me save you the money.

Analysis: Insolvent banks + ballooning deficits + double digit unemployment = credit tightening = negative cash flows = bankruptcies = no capex = the biggest ass wide recession since 1932.

Operations can stretch sunk capital for years!
paolo.franzoi 12/5/2012 | 4:10:06 PM
re: Global Capex Set for 2010 Rebound
waverunner,

How would you contrast this to say the situation in 1982 with all of the same + 15% mortgage rates?

seven
HomerJ 12/5/2012 | 4:10:03 PM
re: Global Capex Set for 2010 Rebound so yeah, this recession is similar to '81. EXCEPT. the finanacial system is on life support. interest rates are already low. no one is lending. until the banks are nationalized and forced to loan, this aint over.
waverunner 12/5/2012 | 4:10:03 PM
re: Global Capex Set for 2010 Rebound 1982 was a controlled recession brought on by fiscal tightening to rein in runaway inflation. As fiscal policy changed growth returned. What is different is with no fiscal policy left we are left with monetary policy (increasing money supply) to fund stim packages. Stim packages take time to work (fed still thinks big banks are not insolvent and don't need to be nationalized), also increasing money supply, has the effect of increasing inflation, although there is none now, there will be eventually, so expect fiscal tightening in the future which means again a slow down. In short it will be some time before we get our asses out of this, certainly not 2010.
Stevery 12/5/2012 | 4:10:00 PM
re: Global Capex Set for 2010 Rebound Meant to also add this:

So, I actually think it is a lot more similar than different.

It's really quite different from 82. That was inflationary, now is deflationary.

In an inflationary environment, cash loses value over time so you accelerate necessary purchases.

In a deflationary environment, cash gains value over time so you delay necessary purchases, since it will be cheaper in the future. (for example, why would you buy a house today when prices are still declines 20% per year?)

Money hoarding will cause interesting financial tests for those clowns who keep telling us that they are immune to the downturn.
Stevery 12/5/2012 | 4:10:00 PM
re: Global Capex Set for 2010 Rebound You forgot we had the savings and loan scandal then.

Not in 82. You're thinking 89-91.

In fact, I'm surprised that everyone is avoiding the solution implemented for the S&L meltdown. All of dead banks were seized. Their good assets were sold off to solid (solvent) banks, and their bad assets were put into the "Resolution Trust Company". The RTC was in charge of selling the realestate to the highest bidder.
DarkWriting 12/5/2012 | 4:10:00 PM
re: Global Capex Set for 2010 Rebound Savings and Loan deal was in the '90s.

I just wish the people in this country (US) would get their heads out of their a$$e$ (pun intended) and realize that the savings and loan fiasco as well as this depression occured on the Republican's watch. They (Reagan and Bush 2.0) also each doubled the national debt during their tenures. What the hell does it take to get these guys banished from the country for another 100 years?

Free markets are fine for some things but the capitalists need to be kept on a VERY short leash.

DW
paolo.franzoi 12/5/2012 | 4:10:00 PM
re: Global Capex Set for 2010 Rebound
You forgot we had the savings and loan scandal then. So, I actually think it is a lot more similar than different.

seven
HomerJ 12/5/2012 | 4:09:59 PM
re: Global Capex Set for 2010 Rebound I wonder what General Tao would do? As we know, he is quite the warrior. And his chicken, oh so delightful.
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